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RAILWAY 
TRANSPORTATION 

A  HISTORY  OF  ITS  ECONOMICS  AND 
OF  ITS  RELATION  TO  THE  STATE 


BASED,  WITH  THE  AUTHOR'S  PERMISSION,  UPON  PRESIDENT 
HADLEY'S    "  RAILROAD  TRANSPORTATION  :   ITS 
HISTORY   AND  ITS  LAWS" 


.    t    (    I, 

(    ''.'If 
BY 

CHARLES    LEE    RAPER 

PROFESSOR    OP     ECONOMICS,    DEAN    OF     THE     GRADUATE    SCHOOL, 

UNIVERSITY    OF   NORTH   CAROLINA 
AUTHOR  OP  "THE   PRINCIPLES  OF  WEALTH  AND  WELFARE,"   ETC. 


G.  P.  PUTNAM'S  SONS 

NEW   YORK   AND    LONDON 

Ube  "Rntcherbocher  press 
1912 


COPYKIGHT,    1912 
BY 

CHARLES  LEE  RAPER 


Vbe  ftnickerbocker  prcM,  lUw  fiocft 


9 


Zo 

THE  MEMORY   OF 

GEORGE  NEWTON   RAPER 

WHO   AT  THE  TIME  OF    HIS  DEATH,   AT  THE  AGE  OF  TWENTY-ONE 

HAD   BEGUN   TO   DEVOTE   HIS   LIFE   TO   THE   STUDY   OF 

ECONOMIC   PROBLEMS 


244776 


PREFACE 

SO  great  has  been  the  development  of  railway  trans- 
portation, and  so  important  have  been  the  laws 
of  the  State's  relation  to  it,  since  President  Hadley's 
book  was  written,  in  1885,  that  it  is  vitally  necessary 
to  bring  the  statement  down  to  the  present.  The 
last  quarter  of  a  century  has  been  so  full  of  significant 
change,  that  it  must  necessarily  be  included  in  any 
work  on  railways. 

Railway  Transportation  is  a  new  book,  even  in  that 
part  which  treats  of  the  early  years,  though  it  is, 
with  his  permission,  based  upon  Hadley's  Railroad 
Transportation — a  work  so  admirable  that  it  deserves 
to  live  as  long  as  railways  are  the  subject  of  serious 
study.  Its  chief  purpose  is  to  revise  and  enlarge 
Hadley's  book.  It  traces  the  history  of  railway 
transportation  in  its  more  vital  aspects  in  Great 
Britain,  France,  Italy,  Germany,  and  the  United 
States — in  the  most  characteristic  sections  of  the 
world.  It  traces  this  historical  development,  not 
for  the  sake  of  the  antiquarian,  solely  to  throw  light 
upon  the  present  management  and  regulation  of  the 
railways;  and,  along  with  the  historical  narrative, 
runs  that  spirit  of  criticism  which  makes  comparisons 
and  estimates  of  values.  In  its  final  chapter  the 
reasons  and  the  methods,  as  well  as  the  history,  of 
state  operation  in  the  representative  coimtries  of 


vi  Preface 

Belgium,  Austria,  Italy,  France,  and  Germany  receive 
consideration. 

In  all  cases  of  facts,  the  effort  has  been  made  to 
ascertain  the  most  reliable  ones.  The  records  have 
been  examined,  and,  where  these  have  been  fotmd  to 
be  discrepant  or  lacking  in  uniformity,  every  effort 
has  been  made  to  correct  them.  The  works  of  the 
best  students,  so  far  as  the  author  can  judge  them, 
have  also  been  examined,  for  general  facts,  observa- 
tions, and  criticisms.  Since  the  book  is  designed  for 
the  general  reader,  as  well  as  the  special  student  of 
railways,  few  foot  notes  are  made,  only  for  contro- 
verted points.  The  author  desires,  in  this  connection, 
to  express  his  great  appreciation  of  the  kindness 
which  has  been  shown  him  in  all  his  efforts  of  investi- 
gation. He  would  acknowledge  his  obligations  par- 
ticularly to  those  in  charge  of  the  Konigliche  Biblio- 
thek,  at  Berlin,  and  of  that  remarkably  complete 
collection  in  the  Ministeriimi  der  offentHchen  Ar- 
beiten  in  Preussen. 

The  records  and  the  best  secondary  sources  have 
been  examined,  but  this  has  not  been  the  only  task. 
Personal  observations,  which  cover,  with  fair  complete- 
ness, the  conditions  of  the  lines  and  equipment,  the 
methods  of  operation,  and  the  general  characteristics 
of  the  traffic,  have  been  made  in  all  the  countries  that 
come  imder  treatment. 

C.  L,  R. 

Chapel  Hill, 

September  i,  191 1. 


CONTENTS 

:hapter  rxGC 

I      Modern  Transportation  .         .         .  i 

II     Railway    Transportation    in  Great 

Britain          .....  14 

(a)  Development  of  the  Lines           .          .  15 

(b)  General  Conditions  of  Traffic     .          .  25 

III  Railway    Transportation    in    Great 

Britain 29 

(a)  Passenger  Service  and  Rates       .          .  29 

(b)  Freight  Service  and  Rates          .          .  35 

IV  Railway  Transportation  in  Great 

Britain.         .....  45 

Ideals  and  Machinery  of  State  Control  45 

V     Railway  Transportation  in  France  .  61 

(a)  Development  of  the  Lines — State  or 

Private          .....  62 

(b)  General  Conditions  of  Traffic     .         .  78 

VI     Railway  Transportation  in  France  .  83 

(a)  Passenger  Service  and  Rates       .         .  84 

(b)  Freight  Service  and  Rates           .          .  86 

(c)  Ideals  and  Machinery  of  State  Control 

— Management      ....  95 


viii  Contents 


VII     Railway  Transportation  IN  Italy         102 
Development  of   the  Lines — State  or 
Private         .....     103 

VIII    Railway  Transportation  IN  Italy     .     121 

(a)  General  Conditions  of  Traffic      .  .     121 

(b)  Passenger  Service  and  Rates       .  .124 

(c)  Freight  Service  and  Rates  .  .      127 

(d)  Ideals  and  Machinery  of  State  Control 

— Management      ....     129 

IX     Railway    Transportation    in    Ger- 
many    134 

(a)  Development  of  the  Lines — State  or 

Private  .....     134 

(b)  General  Conditions  of  Traffic      .         .     143 

X     Railway    Transportation    in    Ger- 
many    150 

(a)  Passenger  Service  and  Rates)       .  .     150 

(b)  Freight  Service  and  Rates  .  .155 

XI     Railway    Transportation    in    Ger- 
many    166 

Ideals  and  Machinery  of  State  Con- 
trol— Management  .  .  .167 

XII     Railway     Transportation  in  the 

United  States        .         .  .  .178 

(a)  Development  of  the  Lines  .  .178 

(b)  Speculation     ,         .         .  .  •     193 


Contents 


IX 


CBAPTXK 

XIII 


(a) 
(b) 


XIV 


(a) 
(b) 


XV 


(a) 
(b) 


XVI 


Railway     Transportation    in    the 
United  States 
State  Aid 
Competition  and  Combination 

Railway     Transportation    in    the 
United  States 
General  Conditions  of  Traffic 
Passenger  Service  and  Rates 

Railway     Transportation    in    the 
United  States 
Freight  Service  and  Rates 
Theory  of  Rates 

Railway     Transportation    in    the 
United  States 
Ideals  and  Machinery  of  State  Control 

1.  State  .... 

2.  National     .... 

XVII     State  Operation  of  Railways 

Reasons 

Methods 

History  . 
I.     Belgium 
ft.     Austria 

3.  Italy 

4.  France 

5.  Germany 
General  Results 

Extension  of  the  Parcels  Post,  etc 

Index 


197 
197 
203 

215 

215 
218 

224 
224 
242 

245 
245 
245 
252 

278 
278 
282 
286 
287 
292 

295 
297 
299 
303 
305 
317 


TABLE   OF  COMPARISONS 


Kilometre 

.6213 

mile 

Kilogram 

2.205 

pounds 

Ton  (metric  or  looo  kilograms) 

2205 

poimds 

Ton  (English) 

2240 

pounds 

Ton  (short) 

2000 

poimds 

Pound  Sterling 

4.866 

dollars 

Shilling 

«4.3 

cents 

Penny   (English) 

2 

cents 

Mark 

23.8 

cents 

Pfennig 

.238 

cent 

Franc 

19.3 

cents 

Lira 

19.3 

cents 

Centime 

.193 

cent 

Railway  Transportation 


CHAPTER  I 

MODERN  TRANSPORTATION 

THE  last  three  generations  have  seen  so  many 
new  things,  that  they  have,  quite  largely, 
been  confused  as  to  their  real  significance.  Some  of 
these  new  things  have  brought  the  greatest  and  most 
wide-spread  revolutions;  some  have  been  merely 
manifestations  of  change.  The  coming  of  a  new  form 
of  transportation  and  communication,  the  steamship 
on  the  sea  and  the  locomotive  on  the  land,  has 
perhaps  been  the  most  fundamentally  revolutionary 
of  all  the  many  wonderful  things  in  modem  life. 
It  has  been  a  destroying  and  a  re-making  force 
wherever  it  has  come. 

Transportation,  of  some  form,  has  always  existed. 
The  sled  upon  the  ice  or  upon  the  ground,  drawn  by 
animal  or  man,  and  the  boat  upon  the  water,  of 
whatever  shape  and  motive  power,  have  been  vital 
forces  in  life  from  the  beginning;  and  both  of  them 
have  gone  through  many  stages  of  development  as 
to  form  and  efficiency,  though  most  of  these  changes 
have  come  within  a  shorter  span  than  a  century  and  a 

I 


2  Railway  Transportation 

quarter.  The  highway  and  the  waterway,  in  some 
form,  man  has  always  had;  and  they  have  profoundly 
influenced  his  life,  even  though  all  unnoticed  by  him. 
Transportation  in  any  and  all  forms  was,  however, 
until  a  hundred  years  ago,  really  a  minor  thing,  if  not 
a  very  insignificant  one,  as  compared  with  what  it 
has  become  within  the  last  half  of  a  century.  Few 
products  were  till  then  moved  from  place  to  place- 
Communities  were  largely  dependent,  for  the  satia- 
tion of  their  wants,  upon  their  own  products.  They 
largely  lived  the  self-sufficing  life,  so  far  as  the  pro- 
ducts of  their  hands  or  the  demands  of  their  bodies 
were  concerned.  Rarely  did  people  move  from 
place  to  place,  for  pleasure  or  for  business;  they  lived 
in  comparative  isolation.  Traffic,  whether  of  com- 
modities or  of  persons,  was,  therefore,  till  then  very 
slight.  Now  all  this  has  been  changed.  The  move- 
ment of  goods  and  persons  has  come  to  be  of  tremen- 
dous proportions  and  consequences. 

Little  wonder  that  the  world  changed  so  slowly 
throughout  all  the  centuries.  Its  migrations  of 
persons  and  its  transportation  of  their  products  were 
too  expensive.  The  all-consuming  passion  of  war 
alone  could  put  these  into  motion;  the  desire  to  gain 
in  trade  or  by  change  in  occupation  or  residence  was 
for  the  most  part  too  weak  to  bring  great  movement. 
Among  the  ancient  peoples,  efficient  highways  existed 
only  where  war  on  a  large  scale  was  the  customary 
thing.  The  most  famous  highways  of  the  world 
have  been,  until  in  very  recent  years,  the  Roman 
roads,  which  were  constructed  and  maintained  for 
military  purposes,  rather  than  for  commercial  trans- 
portation.    With  the  decline  in  the  military  power  of 


Modern  Transportation  3 

the  Roman  State  came  decay  to  the  highways,  and 
Europe  saw  no  effort  at  extensive  building  or  main- 
tenance of  highways  for  almost  a  thousand  years. 

At  the  close  of  this  long  period,  popularly  known  as 
the  "  Dark  Ages, "  commerce,  rather  than  war,  assimied 
the  lead  in  such  an  effort.  The  work  of  the  famous 
Hanseatic  and  Rhenish  leagues  in  the  construction 
and  maintenance  of  national  and  international  high- 
ways was  one  of  their  greatest  achievements;  they 
connected  for  the  first  time  many  points  in  Northern 
Europe.  London  now  held  relationship  with  Eastern 
Europe,  and  Northern  Scandinavia  with  Southern 
France.  Though  this  movement  in  transportation 
was  primarily  for  commercial  reasons,  it  exercised 
a  profound  influence  upon  the  political  and  social 
phases  of  life,  as  well  as  the  commercial. 

Then  came  highway  building  for  politico-national 
reasons — to  cement  the  peoples  of  a  thousand  feudal 
localities,  largely  different  and  independent,  into  a 
nation,  to  add  to  the  power  and  pleasure  of  an  ambi- 
tious monarch.  France  was,  perhaps,  the  best  example 
of  this  road  building.  Not  only  highways,  but  also 
artificial  waterways  as  connecting  links  of  the  natural 
waterways,  were  under  such  an  impulse  constructed. 
Commercial  motive,  to  be  sure,  played  in  this  a  part, 
but  politico-national  purposes  were  the  dominant 
ones. 

The  modem  highway,  which  was  the  product  of 
the  forces  of  commerce  and  nationalisation,  and  the 
waterway,  of  the  river  or  the  canal  type,  constituted 
until  practically  sixty  years  ago  the  important  means 
of  the  transportation  of  persons  and  commodities 
and  of  the  transmission  of  ideas.     These  means  of 


4  Railway  Transportation 

transportation,  certainly  the  highway,  were,  however, 
for  the  most  part  for  short  distances;  and  so  they 
continue  to  be  to  this  day.  The  world  had  little  of 
long-distance  transportation  until  less  than  a  hund- 
red years  ago.  The  traders  of  the  Middle  Ages  had, 
to  be  sure,  their  caravans  moving  from  far-off  India 
to  the  Mediterranean  Sea,  and  from  this  to  Northern 
Europe,  but  these  long-distance  caravans  moved  only 
occasionally.  Frequent  communication  between  the 
large  centres  of  Europe  was  unknown  until  after  the 
coming  of  the  railway.  It  was  not  until  1833  that 
London  and  Paris  were  connected  by  a  daily  maU,  and 
Paris  and  London  were  not  then  connected  with  the 
other  centres  of  Europe  by  frequent  mails,  only  once 
or  twice  weekly.  Cheap  and  efficient  postal  service 
did  not  come  in  England  until  1840,  and  in  the  other 
leading  countries  until  later.  A  fairly  efficient 
national  postal  service  existed  by  1851-52,  an  inter- 
national one,  not  for  a  quarter  of  a  century  more. 

Another  means  of  communication  came  at  practi- 
cally the  same  time  as  the  efficient  daily  mail — the 
telegraph.  This  came  into  use  in  England  by  1 839-40, 
in  the  United  States  by  1844,  in  Germany  and  Austria 
by  1849,  and  in  France  by  1851;  and  this  means  of 
the  transmission  of  ideas  was,  just  as  the  railway,  a 
tremendous  force  to  make  and  to  change  life. 

The  application  of  steam  as  the  motive  power  for 
the  ship  upon  the  water  was  a  dynamic  thing.  While 
in  use  upon  the  river  and  coast- wise  craft  early  in  the 
nineteenth  century,  steam  was  not  regularly  extended 
to  ocean  navigation  until  1838,  and  it  was  not  until 
after_  1850  that  it  proved  its  permanent  superiority 
over  the  sail.     Since  that  date  the  ocean  tonnage 


Modern  Transportation  ,  5 

and  passenger  traflfic  have  year  after  year  grown, 
until  they  are  now  of  huge  proportions;  and  the  size 
and  efficiency  of  this  form  of  transportation  and 
communication  each  year  become  greater. 

The  coming  of  steam  to  the  ship  at  sea  brought  a 
great  revolution  to  navigation  and  to  international 
relationship.  The  coming  of  the  locomotive  brought 
a  still  greater  one  to  the  internal  commerce  and 
industry  of  peoples,  as  well  as  to  their  political  and 
social  thought.  The  steam  railway  came  to  take  the 
place  of  the  highway  and  the  canal  for  most  of  the 
traffic,  for  practically  all  of  the  passenger  traffic  and  a 
large  bulk  of  the  freight.  The  scope  and  magnitude 
of  its  tasks,  and  the  vital  importance  of  its  work, 
have  caused  modem  business  life  to  crystallise  itself 
into  the  railway  organisation,  and  have  made  the 
railway  corporation,  in  turn,  perhaps  the  most  dom- 
inant factor  in  the  field  of  politico-governmental 
thought  and  activity. 

The  railway  has  now  for  more  than  a  half  century 
been  the  most  vitally  important  means  of  the  trans- 
portation of  goods  and  persons  and  of  the  transmission 
of  ideas.  The  technics  of  railway  transportation  has 
become  one  of  the  greatest  of  the  applied  sciences; 
the  making  of  the  road-beds,  locomotives,  and  rolling- 
stock,  has  called  into  being  and  maintained  upon  a 
large  scale  one  of  the  greatest  of  all  phases  of  engineer- 
ing and  industry;  the  traffic  of  the  railway,  in  its 
solicitation,  movement,  storage,  and  delivery,  has 
become  one  of  the  world's  most  important  achieve- 
ments; the  finance  of  railway  transportation  has  come 
to  possess  tremendous  proportions — to  involve  as 
much  as  one-eighth  of  the  entire  wealth  of  a  highly 


6  Railway  Transportation 

efficient  and  productive  people,  as  is  the  case  in  the 

United    States. 

That  such  an  institution  should  have  played  a 
vitally  influential  rdle  in  European  and  American 
politics,  in  fact  in  all  national  and  local  politics, 
wherever  it  exists,  is  no  less  than  could  be  expected. 
It  has  been  active  in  the  lobbies  of  legislative  hauls; 
it  has  been  active  at  the  polls ;  it  has  had  its  friends 
in  all  assemblies;  it  has  given  legislators  their  most 
difficult  task  in  constructive  law-making.  The 
creation,  perfection,  and  operation,  of  the  Interstate 
Commerce  Act  have,  we  think,  been  the  severest  test 
of  the  efficiency  of  the  Congress  of  the  United  States 
it  has  ever  had. 

The  railway  has  become  so  great  because  it  has 
rendered  so  vitally  important  a  service.  It  has 
created  a  large  body  of  utilities.  The  creation  of  the 
products  of  the  soil  is  of  little  avail  unless  they  can 
be  transported  to  the  centres  of  their  transformation 
into  finished  goods — into  those  commodities  which 
are  demanded  for  the  satiation  of  the  ordinary  uni- 
versal wants  for  food,  clothing,  and  shelter.  And 
so  are  these  finished  products  of  little  value  un- 
less they  can  be  placed  at  the  door  of  the  consumer, 
wherever  he  may  wish  to  dwell.  Railway  trans- 
portation has,  therefore,  made  possible  a  large 
production  of  raw  materials,  wherever  the  earth  is 
adapted  to  their  making;  has  made  possible  con- 
centration in  the  making  of  finished  goods  in  those 
places  where  natural  motive  power  exists  or  men 
congregate;  has  made  possible  living,  for  all  classes 
of  men,  upon  a  vast  and  varied  territory.  Rail- 
way transportation  has  almost  completely  changed 


Modern  Transportation  7 

the  surroundings  of  man's  life — the  relation  of  his 
wants  and  products.  It  has  destroyed  his  isolation 
and  his  economic  self-sufficiency.  It  has  worked 
always  toward  the  nationalisation  of  peoples  in  their 
business  and  in  their  social  and  poUtical  relations 
and  ideas. 

Railway  transportation  has  also  bro'ight  complica- 
tions of  its  own.  The  economic  activity  of  a  people 
covers,  as  a  result  of  the  coming  of  the  railway,  a 
vaster  range,  and  its  problems,  therefore,  become 
more  difficult.  Only  the  more  capable  man  can 
control  such  extensive  activity,  only  the  more  efficient 
government  can  regulate  it.  The  railway  has  become 
vitally  interwoven  with  all  the  varied  and  complicated 
phases  of  economic  life ;  it  has  made  the  problem  of  the 
distribution  of  goods  or  values  into  wages,  interest, 
pay  of  management,  and  taxes,  all  the  more  confused ; 
it  has  changed  the  wants  as  well  as  the  productive 
power  of  the  labourer;  it  has  caused  tremendously 
large  accimiulations  of  capital  to  be  made;  it  has 
meant  that  property  rights  become  international 
and  national,  as  well  as  local.  That  such  a  form  of 
transportation  should  have  come  to  be  considered  as  a 
public  business,  at  least  a  quasi-public  one,  is  perfectly 
natural.  The  really  strange  thing  is  why  the  people 
should  have  so  slowly  come  to  have  this  conviction. 

This  new  form  of  transportation  and  communica- 
tion, this  thing  which  has  meant  revolution  of  life  and 
thought  wherever  it  has  come,  is  considerably  less 
than  a  century  old.  The  first  railway  in  the  world 
came  one  hundred  and  eleven  years  ago,  in  180 1,  when 
the  first  chartered  horse-car  line  was  opened  for 
service,  in  the  suburbs  of  London.    The  horse-car  rail- 


8  Railway  Transportation 

way  was  of  only  slightly,  if  any,  greater  value  than 
the  highway,  but  it  was  to  become  the  foundation 
upon  which  the  locomotive  railway  was  to  be  built. 
The  locomotive  was  slow  in  coming  after  the  dis- 
covery of  the  power  of  steam  as  a  motive  force.  It 
required  compact  space  in  which  to  generate  the 
large  volume  of  steam  needed;  and  it  was  not  until 
the  tubular  boiler,  with  its  artificial  draft  made  by 
the  escaping  steam,  had  been  invented,  that  the 
locomotive  became  an  effective  thing. 

It  was  no  mere  chance  that  the  first  locomotive 
was  constructed  in  England.  Her  industrial  revolu- 
tion in  ihe  field  of  the  making  of  textiles,  especially 
cottons,  had  given  her  the  inventive  spirit,  and  had 
created  the  surplus  capital  necessary  for  such  a  work. 
The  spirit  and  the  economic  conditions  were  ready, 
but  it  was  an  immensely  difficult  task  to  secure  from 
Parliament  the  legal  right  to  construct  the  first  steam 
railway.  The  canal  and  turnpike  interests  had  for 
more  than  a  quarter  of  a  century  been  the  dominant 
factor  in  English  politics,  and  the  charter  to  the 
Liverpool  and  Manchester  Railway  Company  was 
obtained  only  after  a  most  determined  fight. 

The  beginnings  of  the  steam  railway  came  during 
the  latter  part  of  the  decade  1820-30.  This  form  of 
transportation  did  not,  however,  prove  itself  a  well 
defined  and  permanently  useful  one  until  near  the 
middle  of  the  century — sixty  years  ago.  By  this 
time  it  was  clear  that  the  railway  was  a  radically  new 
form  of  transportation;  that  it  was  not,  as  had  for 
twenty  years  been  thought,  merely  an  improved 
highway,  upon  which  every  citizen  could  at  pleasure 
operate  his  cars  and  pay  his  tolls.     It  had  now  become 


Modern  Transportation  9 

a  settled  policy  that  only  the  corporate  owner  could 
operate  the  cars  or  trains  and  that  only  the  owner  of 
the  way  was  responsible  for  the  traffic,  the  charge, 
and  the  accidents.  It  had  also  by  this  date  become 
evident  that  isolated  and  disconnected  lines  could  not 
possibly  perform  the  proper  service,  and  could  not 
pay  a  fair  interest  on  the  capital  invested  and  at  the 
same  time  sell  their  services  at  reasonably  low  rates. 
The  new  form  of  transportation  must,  therefore, 
make  changes  in  its  organisation  before  it  could 
become  efficient;  it  must,  by  consolidating  and  com- 
bining the  old  lines,  create  long-distance  through  ones; 
it  must  construct  new  lines  to  make  the  old  ones  more 
complete;  it  must  offer  a  more  efficient  service  at 
lower  rates. 

In  1850  practically  every  community  in  which  the 
railway  had  come  was  inefficiently  supplied  with 
transportation  facilities.  There  were  a  number  of 
lines,  but  these  were  almost  wholly  disconnected; 
there  was  practically  no  through-traffic,  either  passen- 
ger or  freight.  The  small  lines  now  became  larger 
and  more  connected.  The  new  corporation  began 
to  play  a  vital  r61e  in  business,  finance,  and  politics. 
It  soon  pushed  lines  over  the  hills  and  through  the 
mountain-stretches  which  no  small  corporation 
could  possibly  construct,  and  which  as  independent 
lines  could  not  for  many  years  be  self-supporting,  but 
which  as  integral  parts  of  a  great  system  could  be 
afforded.  The  isolated  short  line  of  railway  was 
hardly  of  more  value  than  the  highway  or  the  canal ; 
the  new  long  line,  operated  by  a  powerful  corporation, 
was  in  every  way  a  tremendous  and  revolutionary 
force.     Localities  which  had  been  widely  separated 


10  Railway  Transportation 

now  became  intimately  connected ;  they  now  fonned 
one  greater  locality,  with  its  common  life  and  interests. 
This  consoHdation  and  extension  of  the  railways 
went  on  at  practically  the  same  time  as  the  increase 
in  the  speed,  comfort,  and  efficiency  of  the  ocean 
steamship,  and  the  two  have,  working  together, 
gradually  made  the  thousands  of  localities  of  the 
world,  all  isolated  and  more  or  less  different  and 
antagonistic,  into  one  vast  community.  The  spirit  of 
great  transportation  has  indeed  revolutionised,  con- 
nected, and  civilised  the  world,  as  well  as  nations  and 
localities.  The  industries,  the  commerce,  and  the 
national  administrations,  have  all  worked  together 
for  a  larger,  a  more  consolidated,  and  a  more  efficient 
system  of  transportation  and  communication. 

There  have  in  recent  times,  to  be  sure,  been  some 
obstructions  to  international  relationships  and  trades, 
as,  for  instance,  the  protective  tariff  systems  of  the 
various  nations,  but  these  have  been  in  many  cases 
offset  by  cheap  transportation,  rail  or  water.  Most 
of  the  production  of  the  world  is  now  no  longer  for 
local  constunption,  but  for  transportation  to  all 
its  parts.  The  supply  of  products  has  come  to  be 
centred  upon  an  international  market,  and  so  has 
the  demand  for  them.  This  great  achievement  has 
been  the  work  of  the  modem  means  of  transportation 
operating  in  connection  with  the  modem  system  of 
international  banking — a  remarkably  efficient  institu- 
tion, which  has,  like  the  railway,  the  steamship, 
the  telegraph,  and  telephone,  etc.,  come  to  bless  man. 

Railway  extensions,  even  though  at  the  time  not 
profitable,  and  with  slight  prospect  of  becoming  so  in 
the  near  future,  were  made,  to  meet  the  demands  of 


Modern  Transportation  ii 

the  growing  spirit  of  nationality,  as  well  as  of  commerce 
and  industry.  The  railway  had  become  a  political 
necessity,  more  especially  in  Germany,  Belgivmi, 
Italy,  and  Austria.  Solferino  and  Magenta,  battles 
which  fundamentally  changed  the  life  of  the  Italian 
nation,  turned  largely  upon  the  fact  of  the  non-exist- 
ence of  certain  stretches  of  railway.  Prussia  wit- 
nessed, in  the  Franco-Prussian  war,  the  efficacy  of 
an  efficient  system  of  railway  transportation;  her 
armies  were,  by  means  of  it,  at  the  strategic  spot  at 
which  to  strike  an  effective  blow. 

Under  the  powerful  spirit  of  growing  nationality 
and  commerce,  the  railway  mileage  of  the  world 
rapidly  increased,  from  approximately  24,000  in 
1850,  to  about  231,000  in  1880,  to  practically  600,000 
in  1 910.  The  traffic  has  even  more  than  kept  pace 
with  the  marvellous  growth  in  the  mileage,  and  in 
a  nimiber  of  coimtries  transportation  has  become 
cheaper  and  cheaper,  as  well  as  increasingly  efficient. 
But  in  some  of  the  coimtries,  notably  the  United 
States  and  Great  Britain,  the  means  of  efficient 
control  by  the  government  did  not  keep  the  pace  set 
by  the  growing  mileage  and  traffic,  and  in  consequence 
certain  abuses  arose  which  need  not  have  been. 

This  new  form  of  transportation,  this  fundamental 
force  in  all  phases  of  modem  life,  is  at  work  at  all 
times  and  almost  everywhere.  In  the  price  of  prac- 
tically every  commodity,  there  is  a  part  that  is  due 
to  the  railway.  Everybody  is,  therefore,  interested 
in  it,  whether  he  is  conscious  of  the  fact  or  not. 
The  transportation  service  is,  on  the  other  hand, 
fundamentally  dependent  for  its  prosperity,  yes,  its 
life,  upon  the  general  conditions  of  the  traffic,  upon 


12  Railway  Transportation 

the  prosperity  of  the  agriculture,  the  forestry,  the 
horticulture,  the  manufacture,  and  the  commerce 
of  a  community  or  a  nation.  It  cannot  possibly 
prosper  unless  the  people  also  prosper.  It  cannot 
charge  rates  higher  than  the  shippers  can,  from  the 
point  of  view  of  both  present  and  future  production, 
afford  to  pay.  A  railway,  or  any  other  form  of 
transportation,  can,  therefore,  never  afford  to  be 
hostile  to  the  interests  of  a  community,  nor  the  com- 
mimity  to  its  transportation  agencies.  It  is  only  when 
the  railway  is  in  the  hands  of  the  short-sighted  manager, 
and  the  interests  of  the  public  are  dominated  by  the 
near-blind  shipper,  that  trouble  between  the  two 
arises.  Short-sighted  and  non-sympathetic  railway 
management,  as  well  as  unintelligent  and  hostile 
legislation  and  control  by  the  state — these  are  both 
in  the  long  run  really  self -destructive. 

It  has,  however,  usually  required  much  time 
before  the  two  parties  have  seen  each  other's  view- 
point. Too  long  the  railway  manager  has  seen  only 
one  side  of  the  situation;  too  long  has  he  fancied  his 
business  a  private  one,  when  it  should  always  be  a 
public  or  a  quasi-public  one.  Too  long  has  the  state, 
more  especially  in  Great  Britain  and  the  United 
States,  permitted,  by  its  charters  and  laws,  the  rail- 
way manager  thus  to  think  of  himself.  A  great 
struggle  finally  came,  as  come  it  must  under  such 
circumstances,  between  two  parties  who  should  have 
from  the  nature  of  their  relationship  always  been 
friends.  The  sanity  of  the  railway  management 
and  the  wisdom  of  the  people  are  always  shown  in 
the  condition  of  the  relationship  between  the  railways 
and  the  state. 


Modern  Transportation  13 

References 

(No  attempt  is  made  to  give  an  exhaustive  list  of  the  sources. 
Only  those  which  we  have  found  to  be  most  valuable  are  given; 
and  these  are  arranged  in  the  order  of  what  we  believe  is  their 
relative  importance.) 

A.  de  Foville:  La  Transformation  des  Moyens  de  Transport, 
1880,  Paris. 

E.  Sax:  Die  Verkehrsmittel in  Volks-u.  Staatswirthschaft,  2  vols., 
1878-79,  Vienna. 

W.  S.  Lindsay:  History  of  Merchant  Shipping  and  Ancient 
Commerce,  4  vols.,  1874-76,  London. 

Archiv  fUr  Eisenbahnwesen,  Berlin. 

R.  von  der  Borght:  Das  Verkehrswesen,  1894,  Leipzig. 

M.  M.  von  Weber:  Nationalitdt  u.  Eisenbahnpolitik,  1876, 
Vienna. 

C.  F.Adams:  Railroads — their  Origin  and  Problems,  1880,  New 
York. 


CHAPTER  II 

RAILWAY  TRANSPORTATION   IN   GREAT  BRITAIN 

ENGLAND  has  been  the  leader  of  the  world 
along  many  lines.  It  was  here  that  the  first 
modem  system  of  the  making  of  textiles,  the  factory, 
was  introduced;  it  was  here  that  the  first  laws  regu- 
lating employment  in  factories  had  their  origin  and 
fullest  development.  England  has  also  in  com- 
mercial and  transportational  facilities  been  a  pio- 
neer. She  came  to  the  front  in  the  commerce 
and  navigation  of  the  world  during  the  latter  half 
of  the  seventeenth  century,  and  before  the  end 
of  the  eighteenth  she  was  dominant  in  the  field  of 
manufacture.  Her  commercial  and  industrial  ac- 
tivity brought  her  surplus  capital,  as  well  as 
skill  and  spirit,  and  when  the  locomotive  came 
this  capital  was  ready  to  invest  itself  in  it, 
though  it  was  an  untried  field.  English  capital  was 
then  willing  to  invest  itself  in  any  field  of  activity 
which  would  bring  returns,  and  which  would  especially 
stimtdate  commerce  and  manufacture.  The  invest- 
ments which  Englishmen  had  during  the  last  quarter 
of  the  eighteenth  century  and  the  first  twenty-five 
years  of  the  nineteenth  put  into  the  new  method  of 
manufacture,  the  factory,  had  reaped  an  abundant 
harvest. 

14 


Great  Britain  15 

(a)  Development  of  the  Lines 

That  the  first  line  of  steam  railway  should  have 
come  in  England  was,  therefore,  to  be  expected. 
This  line  was  opened  for  service  in  1825.  It  was, 
however,  a  very  short  one,  of  only  eleven  miles,  and 
it  brought  but  the  slightest  public  attention  to  it, 
though  it  was  the  beginning  of  the  most  revolutionary 
fprce  in  modem  life.  The  industrial  progress  and 
''development  of  England  had  by  this  time  come  to 
demand  some  new  means  of  transportation;  the 
highway  had  already  proved  itself  an  inefficient  one 
for  other  than  purely  local  traffic;  the  interior  water 
transportation  facilities  were  steadily  becoming  less 
able  to  meet  the  demands  of  the  ever  expanding 
industries  and  commerce. 

Though  the  first  line  of  steam  railway  created  but 
little  attention  in  the  minds  of  the  people,  it  marked 
an  epoch  in  the  Hfe  of  England  and  theworld;  and  when 
the  Liverpool-Manchester  railway,  chartered  in  1826, 
was  opened  for  traffic  in  1830,  the  masses  began  to 
imderstand,   though   vaguely,   what  had   happened. 

While  English  industries  and  commerce  were  calling 
for  the  coming  of  this  new  means  of  transportation, 
the  railway  was  for  a  time  vigorously  opposed, 
especially  by  those  who  had  capital  in  the  turnpikes 
and  canals;  and  in  i82©-3«r  there  was  comparatively 
a  large  amount  of  capital  thus  invested.  The  people 
were  generally  slow  to  see  the  need  of  a  new  form  of 
transportation.  They  opposed  the  proposition  that 
Parliament  grant  the  legal  rights,  and  they  demanded 
excessively  large  prices  for  its  way.  T0  secure  from 
Parliament  the  charter  for  the  first  important  line, 


i6  Railway  Transportation 

that  of  the  Liverpool-Manchester,  was,  therefore,  a 
tremendous  task.  It  required  the  energies  of  such  a 
remarkable  politician  as  Huskisson,  to  say  nothing  of 
the  expenditure  of  almost  $350,000. 

Opposition  to  such  a  new  form  of  transportation 
could  not,  however,  be  all-powerful  for  long.  English 
industrial  life  demanded  the  railway;  the  canal 
companies,  which  had  had  for  many  years  a  practical 
monopoly,  were  acting  in  a  very  short-sighted  manner 
tind  were,  therefore,  becoming  obnoxious  to  the 
public.  The  Liverpool-Manchester  was  from  the 
beginning  successful,  and  it  rapidly  proved  the  super- 
iority of  the  railway  over  the  highway  and  the  canal. 
Popular  indifference  to  the  new  means  of  transporta- 
tion rapidly  disappeared,  and  Parliament  became  all 
too  eager  to  make  grants  of  charters.  Apphcations  for 
these  became  more  numerous  year  after  year,  until 
in  1836-37,  when  the  demand  for  charters  reached 
the  intensity  of  almost  a  mania.  New  lines  of 
railway  were  constructed,  and  these  were  fairly 
successful,  in  spite  of  the  fact  that  most  of  them  had 
to  compete  with  the  canals.  By  1843  the  foundations 
of  the  present  system  had  all  been  laid  except  those 
of  the  Great  Northern  and  the  Chatham  and  Dover, 
and  by  this  date  the  important  lines  had  all  proved 
their  ability  to  aid  English  industry  and  commerce, 
as  well  as  to  make  fairly-large,  in  some  instances  as 
much  as  10  %  to  15  %,  returns  on  their  capital  invest- 
ment. The  fact  that  railway  construction  came  to 
a  complete  standstill  in  1843-45,  was  due  to  the 
depression  which  came  to  British  industries  as  a 
result  of  pcMt  harvests  and  of  such  disturbing  legis- 
lation as  the  repeal  of  the  Corn  Laws,  not  to  the 


Great  Britain  17 

opposition  of  Parliament  or  the  indifference  on  the 
part  of  the  people. 

Railway  building  in  England  has  from  the  first 
been  done  by  private  enterprise.  At  no  time  has  the 
national  or  the  local  government  given  aid.  The 
operation  of  the  lines  has  also  been  exclusively  private, 
and  there  has  been  little  suggestion  until  very  recent 
years  of  state  management.  Private  capital  unaided 
by  the  state  could  afford  to  make  the  effort ;  the  con- 
ditions of  traffic  were  such  as  to  make  it  profitable. 
In  England,  the  government  has  never  contributed 
to  one  of  the  systems  a  subsidy  or  a  guarantee  of 
interest,  and  but  once  to  a  local  line.  It  is  in  Ireland 
alone  of  all  the  United  Kingdom  that  the  state  has 
rendered  assistance  to  railway  building;  and  here 
the  guarantee  of  interest  has,  by  the  local  authorities, 
been  only  for  certain  lines  that  must  operate  imder 
exceptional  conditions  of  traffic. 

The  companies  at  the  beginning,  and  for  a  consider- 
able time  afterward,  secured  charters  for  only  short 
lines.  There  were  then  numerous  companies,  and 
consequently  many  independent  lines,  with  small 
capital  and  territorial  rights.  During  the  thirty 
years  from  1820,  when  the  first  charter  was  granted 
by  Parliament,  to  1850,  when  there  were  in  operation 
approximately  6600  miles  of  railway,  many  hundred 
charters  were  obtained.  The  average  length  of  a 
line  was  up  to  1843  less  than  thirty  miles,  and  it  was 
hardly  more  than  half  this  in  1844;  during  the  four 
years  1844-47  more  than  six  hundred  small  lines 
were  chartered.  Such  a  policy  of  granting  charters 
meant,  of  course,  that  there  was  much  competition 
between  the  early  railways.     Parliament  did  not  then 


1 8  Railway  Transportation 

understand  that  the  railway  is  from  its  very  nature  es- 
sentially monopolistic ;  it  then  acted  upon  the  assump- 
tion, which  has  since  proven  itself  to  be  incorrect, 
that  all  forms  of  transportation  must  be  competitive. 

The  first  decade  of  the  British  railways  came  to  a 
close  with  a  mileage  of  only  156,  but  the  process  of 
construction  was  at  work;  by  1845  there  were  2531 
miles.  From  1845  to  i860  the  increase  was  much 
more  important.  During  these  years  nearly  $80,000, 
000  were  annually  invested  in  railways,  and  the 
mileage  grew  to  be  10,407,  with  a  total  capital  invest- 
ment of  approximately  $1,700,000,000.  The  next 
decade  witnessed  also  a  great  extension.  The  United 
Kingdom  by  1870  had  15,537  miles.  Since  that  date 
the  growth  in  mileage  per  decade  has  not  been  great, 
though  still  fairly  important.  It  was  20,073  in  1890, 
23,126  in  1908.  With  the  growth  in  the  mileage,  has 
also  come  an  extension  in  the  second,  third,  and  fourth 
tracks.  More  than  one-half  of  the  British  lines  have 
had  since  1900  two  or  more  tracks,  as  compared  with 
approximately  10%  in  the  United  States. 

The  capital  per  mile  of  the  British  lines  has  also 
had  a  notable  growth,  as  may  be  seen  in  the  following 
figures,  of  representative  years: 

1863 £32,804  (about  $160,000) 

1874 £37,000  (     "     $180,000) 

1883 £42,000  (     "     $204,000) 

1900 £53,800  (     "     $262,000) 

1907 £56,000  (     "     $273,000) 

These  figures,  which  are  the  highest  in  the  world, 
give  the  average  for  all  the  lines  of  the  United  King- 


Great  Britain  19 

dom.  For  the  Irish  lines  the  capital  per  mile  is  small, 
about  £16,00  in  1905;  for  the  English  lines  it  is  great, 
neariy  £65,000  in  1905.  The  reasons  for  such  a  large 
per  mile  capitalisation  have  been  nimierous,  and  at 
times  not  particularly  clear.  The  right-of-way  has 
been  expensive.  The  British  people  have  not  been 
eager  for  the  railway  to  come,  and  they  have  given 
no  land  for  its  use.  The  cost  of  securing  charters 
and  lawyer's  service  has  been  great.  The  road-bed 
and  stations  have  been  built  with  the  view  of  per- 
manence, as  may  be  seen  in  the  fact  that  since  the 
first  it  has  not  been  found  necessary  to  make  import- 
ant changes  in  them.  The  traffic  has  been  dense, 
and  there  has  been  need  of  much  rolling-stock  and 
many  locomotives  per  mile  of  line.  In  Great  Britain 
expenditures  for  improvements  have  been  charged 
to    capital;    in    some    other   countries,    to   revenue. 

Two  bases  of  comparison  of  the  railway  mileage 
have  been  used  by  most  of  the  countries:  (i)  the 
mileage  of  railway  as  compared  with  every  100  square 
miles  of  area;  (2)  the  mileage  of  lines  as  compared 
with  each  unit  of  10,000  population. 

Upon  the  first  basis,  the  British  roads  make  this 
exhibit:  in  1876-77,  13.9  miles  of  line  per  100  square 
miles  of  territory;  in  1885,  15.8;  in  1900,  17.9;  in 
1908,  19.06.  The  mileage  of  the  railways  as  compared 
with  the  area  of  the  United  Kingdom  has,  therefore, 
been  relatively  adequate. 

Upon  the  second  basis,  the  mileage  of  line  has  had 
practically  no  increase,  as  may  be  seen  in  these 
figures;  in  1876-77,  5.04  miles  of  railway  per  10,000 
population;  in  1885,  5.2;  in  1900,  5.32;  in  1907,  5.58. 
The  really  vital  thing  for  a  densely  populated  people 


20  Railway  Transportation 

is,  however,  equipment  per  mile,  rather  than  mileage 
in  itself. 

Great  Britain,  like  many  other  countries,  began 
with  numerous  small  and  disconnected  lines,  but  the 
process  of  consolidation  and  combination  was  early 
at  work;  and  now  for  many  years  there  have  been 
but  a  few  big  systems  of  lines.  This  process  has  for 
Ireland  and  Scotland  achieved  practically  the  same 
result  as  for  England  and  Wales;  it  has  worked  toward 
larger  lines  and  systems,  until  monopoly  rather  than 
competition  has  become  the  controlling  principle  of 
railway  transportation. 

In  England  the  following  systems  have  long  been 
the  dominating  factors  in  transportation:  (i)  the 
London  and  North-western,  which  covers  a  territory 
of  three  hundred  miles  in  length  by  two  hundred  in 
width,  and  which  reaches  from  London  to  Carlisle, 
from  Cambridge  to  Swansea  and  Holyhead;  (2)  the 
Midland,  which  operates  a  service  through  the  eight 
largest  of  the  cities  of  middle  England,  and  which 
by  its  system  of  transfers  profoundly  affects  the  pro- 
sperity of  Glasgow,  Edinburgh,  Newcastle,  and  Hull, 
though  these  towns  are  not  directly  upon  its  lines; 
(3)  the  Great  Western;  (4)  the  London  and  South- 
western; (5)  the  London  and  Brighton;  (6)  the 
South-eastern  and  the  Chatham  and  Dover;  (7) 
the  Great  Eastern ;  (8)  the  Great  Northern ;  (9)  the 
North-eastern;  (10)  the  Great  Central. 

The  process  of  amalgamation,  which  has  created 
the  great  systems,  is  perhaps  one  of  the  most  strikingly 
characteristic  things  in  all  the  history  of  the  British 
railways.  The  history  of  the' lines  is,  in  fact,  one  of 
a  series  of   combinations  and  consolidations.     This 


Great  Britain  21 

process  began  to  be  a  serious  thing  early  in  the  develop- 
ment of  the  lines,  certainly  as  early  as  1844.  The 
public  has,  in  the  United  Kingdom,  never  assumed  the 
attitude  of  serious  hostility  toward  such  amalgama- 
tions as  has  at  many  times  been  its  disposition  in 
the  United  States.  It  has,  to  be  sure,  taken  a  keen 
interest  in  them  and  has  through  the  government  more 
or  less  efficiently  controlled  them.  There  was  during 
the  early  days  some  disposition  to  oppose  consolida- 
tions and  combinations.  The  shipper,  as  well  as 
the  government,  did  not  for  a  time  understand  the 
reasons  for  such  formations  or  their  results.  The 
whole  matter  was,  after  the  English  fashion,  investi- 
gated. The  Board  of  Trade  made  a  report  in  1845, 
to  the  effect  that  consolidations  were  beneficial 
if  they  were  of  continuous,  not  competing,  lines. 
Parliament  also  appointed  committees  to  make 
further  investigations.  The  report  made  to  Parlia- 
ment by  a  committee  in  1846  caused  no  legislation, 
but  the  Railway  and  Canal  Traffic  Act  of  1854  came 
from  the  suggestion  contained  in  a  report  made  in 
1853.  This  act  did  not  put  an  end  to  amalgama- 
tions. It  was  designed  merely  to  protect  the  local 
roads  in  their  through  traffic,  to  secure  proper  facili- 
ties of  transportation,  and  to  prohibit  preference  in 
treatment  to  shippers. 

Consolidations  and  combinations  did  not  cease, 
nor  did  the  attempts  of  the  government  to  regulate 
them.  In  1864  the  Railway  Companies'  Powers  Act 
was  passed,  and  by  this  the  railways  were  specifically 
authorised  to  form  amalgamations  of  companies  and 
lines  and  to  formulate  agreements  between  themselves 
in  practically  all  matters  of  interest.    The  only  re- 


22  Railway  Transportation 

strictions,  which  were  put  upon  the  railways  in  their 
pooling  agreements,  were  to  the  effect  that  the  Board 
of  Trade  should  pass  judgment  upon  all  such  agree- 
ments and  grant  a  certificate  authorising  them. 

In  1865-66  a  Royal  Commission  was  appointed  to 
make  an  examination  of  the  railway  operation  in  all 
of  its  phases.    The  commission  did  a  large  amount  of 
work  and  made  an  excellent  report.     Its  conviction 
/was  that  amalgamations  would  continue,  even  to  the 
I  point  of  a  practical  monopoly.     It  recommended  to 
\  Parliament  that  the  railways  be  allowed  still  greater 
freedom  in  the  making  and  the  operation  of  working 
agreements  among  themselves,  with  the  sole  restric- 
tion that  these  agreements  should  be  published,  and 
that  Parliament  should  have  the  opportunity  to  make 
investigations  into  the  particular  circumstances. 

This  means  that  the  railways  continued  to  consoli- 
date and  combine  practically  at  their  pleasure,  for 
such  legislation  as  there  was  could  not  prevent  it, 
could  not  in  fact  effectually  regulate  it.  In  1872 
the  two  houses  again  appointed  a  committee  to 
examine  into  the  real  status.  This  committee  found, 
as  was  to  be  expected,  that  practically  no  competi- 
tion in  railway  rates  existed,  that  there  was  really 
no  effective  competition  between  the  parallel  lines  of 
railway,  only  between  the  railway  and  ocean  water 
transportation.  The  committee  came  to  the  con- 
clusion that  amalgamation  among  competing  lines 
was  inevitable,  as  well  as  expedient — a  conclusion, 
though  fundamentally  opposed  to  those  of  the  com- 
mittees of  investigation  in  the  United  States,  which 
has  been  affirmed  on  the  Continent  of  Europe.  If 
this  conclusion  was  correct,  the  only  thing  to  do  was 


Great  Britain  23 

to  create  the  machinery  for  the  effective  regulation  of 
amalgamation;  and  this  was  in  part  done  by  the  Act 
of  1873.  This  law  gave  the  power  of  approving 
amalgamations  and  working  agreements  between 
competing  lines  to  a  newly  created  body — the  Railway 
and  Canal  Commission,  instead  of  the  Board  of 
Trade,  as  had  been  done  by  the  Act  of  1863-64. 

Since  1873  there  have  been  many  consolidations 
and  combinations,  though  of  smaller  proportions 
than  those  of  an  earlier  date.  These  have  been 
quite  largely  of  those  lines  which  radiate  from  the 
industrial  and  commercial  centres,  especially  London, 
not  of  parallel  lines.  The  formation  of  the  larger 
systems  had  already  been  achieved.  Great  Britain 
has  now  for  a  good  many  years  had  little,  if  any, 
effective  competition  among  her  railways.  She  is 
really  parcelled  out  between  the  big  lines,  and  the 
shipper  has  expressed  remarkably  little  concern  that 
such  is  the  situation,  that  a  practical  monopoly 
exists.  He  knows  that  the  through  service  has 
become  more  efficient;  he  wishes  for  steadiness  of 
values  and  efficiency  of  service  rather  than  cheapness. 
He  also  knows  that,  because  of  amalgamation,  the 
relations  between  the  railways  have  become  less 
hostile,  that  the  service  has  become  more  imified, 
concentrated,  and  efficient,  while  no  more  expensive. 

Thus  the  United  Kingdom  began  with  the  theory 
that  competition  between  railways  was  an  all-bene- 
ficial thing,  and  that  it  must,  by  the  government,  be 
maintained,  in  order  to  counteract  the  tendency 
inherent  in  railway  transportation  toward  monopoly. 
It  was,  as  early  as  1844,  seen  that  competition  did 
not  regulate  effectively  the  trafiBc  and  rates,  that  it 


24  Railway  Transportation 

was  really  injurious  to  the  railways  and  not  parti- 
culariy  good  for  the  shippers.  Even  this  eariy  it 
began  to  be  seen,  though  vaguely,  that  monopoly 
railway  transportation  under  government  supervision 
was  preferable  to  competitive  transportation ;  and  the 
years  since  1844  have  made  more  clear  such  a  view. 
The  traffic  of  the  British  lines  has  been,  as  we  shall 
later  see  in  detail,  dense,  very  dense  upon  many 
stretches,  but  still  the  roads  have  not  paid  large  divi- 
dends on  their  paid-up  capital.  Their  gross  earnings 
have  been  very  large,  but  their  capitalisation  per  mile 
has  also  been  very  great,  and  their  taxes  have  been 
heavy.  The  following  percentages  fairly  indicate 
the  size  of  the  dividends: 

i860 4-19% 

1870 441% 

1880 4.38% 

1890 4-10% 

1900 341% 

1906 345% 

1908 4.00% 

That  the  British  railways  have  been  operated  with 
comparative  economy,  is  proved  by  these  ratios  of 
operating  expenditure  to  receipts,  known  on  the 
Continent  as  the  co-efficients  of  operation : 

1870 48% 

1880 51% 

1890 54% 

1900 62% 

1906 62% 

1907 64% 


Great  Britain  25 

(b)  General  Conditions  of  Traffic 

The  fundamental  sources  of  railway  traffic  are 
always  to  be  found  in  the  natural  resources  of  a 
community  and  in  the  industry  of  the  people,  as  well 
as  in  its  relations  to  the  people  of  other  localities — 
its  transportation  relationship. 

The  area  of  the  United  Kingdom  is  comparatively 
very  small.  It  amounts  to  only  121,089  square  miles, 
that  of  England  and  Wales  to  only  58,203 — a  territory 
no  larger  than  that  of  many  of  the  States  in  the 
United  States,  far  smaller  than  that  of  some  of  them. 
This  comparatively  insignificant  area  has  many 
rivers,  but  few  of  them  are  navigable  at  all,  only  six 
for  more  than  fifty  miles.  England  and  Wales  are '^ 
by  nature  divided  into  two  general  and  rather  sharply 
distinguished  divisions:  (i)  the  Eastern  and  Southern 
section,  that  is  for  the  most  part  a  plain,  well-suited 
to  agriculture  and  cattle-raising;  (2)  the  Northern 
and  Western  section,  a  portion  that  is  hilly  and 
rugged  and  possesses  the  bulk  of  the  vast  supply  of 
minerals  for  which  England  is  very  famous. 

This  highly  compact  area  is  surrounded  by  water. 
There  is  no  place  in  its  interior  more  than  ninety  or 
ninety-five  miles  distant  from  a  port,  of  which  it 
has  so  many.  With  such  surroundings,  it  is  to  be 
expected  that  ocean  transportation  would  have  a 
profound  influence  upon  its  railway  traffic.  Its  im- 
ports can  enter  at  and  its  exports  go  away  from 
numerous  places,  which  are  really  estuaries  of  the 
sea.  There  are  practically  no  large  cities  that  have 
less  than  two  railways  upon  which  commodities 
may  move  to  competing  ports.     Only  small  amounts 


26  Railway  Transportation 

of  foreign  goods  make  the  transit  of  England — move 
over  her  railways  for  foreign  ports;  and  the  hauls 
of  her  own  commodities,  for  domestic  use  or  for 
exportation,  as  well  as  the  hauls  of  her  imports,  are 
for  short  distances  only.  For  minerals,  the  average 
haul  is  probably  about  thirty-one  miles,  and  for  mer- 
chandise perhaps  about  fifty. 

England,  including  Wales,  makes  a  very  small  and 
compact  area,  but  her  chief  minerals  and  manufactures 
cover  a  still  smaller  and  more  compact  space.  The 
coal-fields,  whose  annual  output  in  1906  was  282,000,- 
000  tons  as  compared  with  415,000,000  in  the  United 
States,  are  located  largely  in  the  North-western 
half.  The  cotton  manufacture,  which  is  her  greatest 
industry, — and  England  has  almost  one  half  of  the 
spindles  of  the  world, — is  localised  in  Lancashire. 
Near  by  the  cotton  industry  is  the  great  woollen 
centre  in  Yorkshire.  The  cotton  industry  is  in  the 
midst  of  the  Lancashire  fields,  which  rank  fourth 
in  the  output  of  the  British  coal  mines;  the  woollen 
industry  is  surrounded  by  the  Yorkshire  fields,  now 
the  largest  in  output.  The  iron  and  steel  industries, 
and  these  are  near  the  first  rank  of  the  world,  are 
localised  not  far  south  of  the  cotton  and  woollen 
centres — in  the  Staffordshire  coal-fields,  at  Birming- 
ham, and  Sheffield.  In  the  production  of  coal,  Great 
Britain  was,  in  1906,  second  in  rank,  next  to  the  United 
States;  and  of  pig  iron  third,  with  Germany  as  well 
as  the  United  States  in  the  lead. 

In  the  transportation  of  these  very  important 
products  and  many  other  minor  ones,  the  railways 
have  for  years  played  the  major  part.  Ocean  steam 
and  sail  ships  carry,  however,  a  no  inconsiderablQ 


Great  Britain  27 

amount;  and  the  inland  waterways  carry  some, 
though  not  in  recent  years  a  significant  quantity. 
The  fact  that  the  British  railways  have  since  1840 
steadily  grown  in  mileage  and  equipment,  while  the 
British  canals  are  to-day  practically  as  they  were 
during  the  decade  of  1830-40,  gives  a  suggestion  as  to 
the  relative  importance  of  inland  water  transportation. 
There  were  4053  miles  of  navigable  waterways  in 
1906.  Of  this  2869  miles  were  independent;  ths" 
remainder  belonged  to  the  railway  compames,  at 
least  was  controlled  by  them.  Their  total  tonnage 
was  at  that  date  about  32,000,000,  two- thirds  of 
which  was  carried  on  a  thousand  miles  of  these  water- 
ways, and  45%  of  which  consisted  of  coal  traffic. 
Practically  all  the  commodities  of  much  value,  whose 
transportation  demands  speed,  have,  since  1850, 
moved  by  rail;  only  the  bulky  and  low-class  goods,  as, 
for  instance,  coal,  stone,  lumber,  etc.,  have  gone  by 
water. 

The  tonnage  of  British  waterways  has  changed 
but  slightly;  in  1888  it  was  approximately  33,000,000 
metric  tons,  in  1906,  as  we  have  said,  about  32,000,000.  . 
In  the  case  of  the  tonnage  of  the  canals,  as  apart 
from  the  rivers,  the  decline  has  been  very  great. 
Since  coal  has  been  by  far  the  most  important  item 
in  the  canal  tonnage,  we  may  take,  for  our  compari- 
sons, figures  from  this  traffic.  The  canals  of  England 
and  Wales  carried  33,000  tons  of  coal  in  1852,  only 
7900  in  1882,  while  for  the  same  period  the  coal 
tonnage  of  the  English  railways  increased  from  317,000 
to  6,546,000. 

The  British  railways  have  thus  come  to  play  the 
dominating  part  in  the  transportation  of  commodities. 


28  Railway  Transportation 

They  are  practically  absolute  masters  of  the  trans- 
portation of  persons.  Speed  and  comfort  are  so 
vitally  important  in  this  traffic,  that  the  canal  offers 
no  rivalry  to  the  railways;  and  the  river,  comparatively 
very  little. 

The  passenger  traffic,  just  as  the  commodities, 
depends  fundamentally  upon  the  resources  of  a 
people,  as  well  as  upon  their  intelligence,  desires,  and 
tastes.  People  travel  for  business,  or  pleasure  and 
culture.  The  voliune  of  their  travel  depends  also 
upon  the  density  of  their  settlement  and  their  per 
capita  wealth.  The  historical  development  of  this 
traffic  is  well  shown  in  Great  Britain. 

For  References,  see  Chapter  IV. 


CHAPTER   III 

RAILWAY   TRANSPORTATION    IN   GREAT   BRITAIN 

(Continued) 

IN  no  other  country  has  there  been  such  a  develop- 
ment of  the  passenger  traffic.  Here  it  is  the 
densest  in  the  world,  in  the  total  number  of  journeys 
and  in  the  average  trips  per  head  of  population.  The 
density  of  the  British  passenger  traffic  may  best  be 
seen  in  a  comparison  with  that  of  some  of  the  other 
leading  countries.  If  we  take  the  year  1900  as  a 
typical  one,  we  have  these  facts  as  to  the  per  capita 
trips:  in  the  United  Kingdom,  27,  in  Germany,  12, 
in  France,  10,  in  the  United  States,  6.9.  Such  a  great 
number  of  trips  per  capita  is,  however,  the  result  of  a 
long  and  steady  development,  the  facts  of  which  are 
here  presented,  for  representative  years:  1.2  trips  in 
1845;  4  in  1854;  9.4  in  1866;  16.9  in  1876;  20.6  in  1886. 
The  Briton  took  in  our  year  of  comparison  the  greatest 
number  of  trips,  and  also  travelled  on  an  average  a 
greater  total  distance — about  245  miles  as  compared 
with  about  220  for  the  citizen  of  the  United  States, 
175  for  the  German,  and  165  for  the  Frenchman. 

(a)  Passenger  Service  and  Rates 

The  volume  of  the  British  passenger  traffic  is,  there- 
fore, large,  the  largest,  in  fact,  in  the  world  for  any 

29 


30 


Railway  Transportation 


nation  taken  as  a  whole.  Its  importance  as  compared 
with  that  of  the  commodities  traffic  is,  in  consequence, 
very  considerable.  Its  volume  has,  however,  not 
become  large  rapidly,  for  its  growth  has  been  with  most 
remarkable  regularity;  from  1854  to  1894,  the  annual 
percentage  of  increase  was  about  5.4% — an  excellent 
exhibit  of  the  stability  of  British  economic  conditions 
and  of  the  conservatism  of  the  policy  of  the  railways. 
For  more  than  fifty  years  the  passenger  traffic  on  the 
British  lines  has  brought  a  greater  percentage  of 
income  as  compared  with  that  of  the  goods  traffic 
than  has  been  the  case  in  any  other  country  as  a 
whole.  The  development  of  the  passenger  service 
as  measured  in  terms  of  its  relative  income  may  be 
best  shown  by  this  table : 


Percentage  of  pas- 
senger receipts 
total  income 


pas-) 

its  to  > 

) 


1855    1865    1870  1880  1890  1900  1905 


Percentage  of 
freight  receipts  to 
total  income. 


49-7 


46.17 


42.8 


53-5 


41.5 


S4-6 


42.9 


52.8 


43.3 


51. 


42.9 


49.69 


In  their  passenger,  as  well  as  in  their  goods  traffic, 
the  British  railways  have  in  the  main  not  followed 
the  cost  of  service  principle  of  rate  making.  They 
have  usually  made  rates  according  to  what  the  traffic 
would  bear,  both  as  to  the  present  and  the  future. 
Their  managers  have,  therefore,  generally  made 
rates  in  order  to  secure  traffic.  They  have  under- 
stood well  that,  for  the  most  part,  it  costs  less  per 
unit  to  carry  a  greater  number  of  units  of  traffic. 


Great  Britain  31 

In  practically  no  instances,  however,  have  they  offered 
the  public  a  rate  so  low  as  not  to  cover  the  cost 
incurred  by  the  railway  in  hauling  the  additional 
traffic.  They  have  not,  on  the  other  hand,  charged 
a  rate  so  high  as  to  stop  or  check  the  movement  of 
traffic.  The  British  railway  managers  have  known 
that  it  is  most  difficult,  if  not  really  impossible,  to 
ascertain  exactly  what  each  unit  of  service  costs; 
and  they  have  also  believed  that  such  a  basis  of  rate 
making  would  not  be  entirely  fair,  could  it  be  accurate- 
ly known.  They  have  made  rates  on  the  principle 
of  the  value  of  the  service,  and  they  have  proved  that 
such  a  principle  may  be  administered  with  a  large 
amount  of  justice  to  the  public. 

The  British  rates  per  passenger  per  mile,  or  per 
ton  per  mile,  are  most  difficult  to  ascertain.  The 
railways  do  not  furnish  the  public  with  adequate 
statistics  of  rates.  They,  unlike  the  Continental  and 
American  roads,  do  not  make  compilations  of  passen- 
ger-mile or  of  ton-mile  statistics;  they  only  publish 
tables  of  the  gross  number  of  passengers  and  cars 
hauled,  the  number  of  train-miles  and  their  expenses. 
The  British  railways  have  as  their  unit  the  train-mile, 
which  is  a  sufficient  one  for  the  railway  manager, 
but  the  passenger-mile  and  the  ton-mile  units,  which 
the  public  would  like  to  know,  are  not  given  or  even 
kept  on  the  books  of  the  railway.  To  quote  from 
President  Hadley,  who  in  1885  said:  "Train-mile 
figures  we  have  in  abundance ;  but  as  long  as  we  do  not 
know  the  average  weight  of  freight  or  the  number  of 
passengers  carried,  we  cannot  even  guess  at  what 
these  figures  indicate  concerning  matters  of  public 
service.     The  English  companies  do  not  furnish  or 


32  Railway  Transportation 

even  compile  ton-mileage  statistics.  This  is  no  mere 
accident  of  practice ;  it  is  characteristic  of  the  principle 
on  which  English  railways  are  managed.  There  is 
a  fimdamental  difference  of  purpose  between  train- 
mile  and  ton-mile  statistics.  The  train-mile  is,  in  a 
rough  way,  the  unit  of  railroad  service — so  much 
work  done  by  the  railroad.  The  ton-mile  (or  passen- 
ger-mile) is,  in  the  same  rough  way,  the  unit  of 
public  service — work  done  for  the  public.  Now,  the 
whole  theory  of  the  English  railroad  system  starts 
from  the  principle  that  the  railroads  are  to  be  managed 
as  business  enterprises,  not  as  matters  of  public 
service;  hence,  their  impatient  rejection  of  the  idea 
that  they  should  compile  a  set  of  statistics  arranged 
from  an  outside  point  of  view,  with  but  little  inside 
interest."  Were  President  Hadley  writing  to-day, 
he  could  not  make  his  statement  more  accurate. 

The  tendency  of  the  British  railway  managers 
and  the  travellers  to  place  great  emphasis  upon  the 
lower-class  service  has,  of  course,  exercised  a  pro- 
found injQuence  upon  the  rates  and  the  traffic.  The 
railways  did  not  at  first  develop  the  third-class  service. 
This  service  had,  in  fact,  its  chief  origin  in  an  Act 
of  Parliament  in  1844 — the  Railway  Cheap  Trains 
Act,  whose  author  was  Gladstone.  This  law  pro- 
vided that  all  charters  to  railways  should  be  condi- 
tioned on  the  supply  of  at  least  one  daily  train  with  a 
third-class  service,  at  two  cents  a  mile,  over  the  whole 
line  of  the  company.  Since  that  date  this  service 
has  year  after  year  grown,  until  in  1908  it  included 
practically  95%  of  the  passengers  and  75%  of  the 
passenger  fares.  The  railways,  of  their  own  initia- 
tive, developed    such  a  service    to  a  degree    never 


Great  Britain 


33 


dreamed  of  by  the  father  of  the  Cheap  Trains  Act. 
That  the  development  of  this  service  may  be  clearly 
seen,  we  present  this  table,  which  gives  for  represen- 
tative years  the  percentage  of  travel  per  class: 


CLASS  I 

CLASS  II 

CLASS  III 

1845 

i860 

1879 

1890 
1900 

1905 

16.00% 

12.31% 
7.00% 
3.70% 
300% 
3-04% 

43-00% 

31-53% 
11.10% 

7-70% 
6.00% 
4.38% 

41.00% 
56.16% 
81.90% 
88.60% 
91.00%, 
92.58% 

Thus  it  is  seen  that  the  third-class  service  has  had 
since  1844  an  important  growth;  from  1844,  when  it 
came  into  extensive  use,  to  1879,  a  remarkable  one. 
Since  1879,  with  the  exception  of  one  period,  the 
increase  has  been  only  slight.  The  important  in- 
crease from  1879  to  1890  was  in  part  due  to  the 
passage  of  another  Cheap  Trains  Act,  in  1883.  This 
law  abolished  the  duty  on  the  third-class  tickets — 
that  is  the  duty  was  to  be  reduced  or  abolished,  in 
accordance  with  the  scale  of  rates  which  the  railway 
charged. 

What  have  these  rates  been?  We  cannot,  because 
of  the  inadequacy  of  the  statistics,  give  anything  like 
a  complete  history  of  them,  and  we  shall  present  the 
facts,  as  far  as  we  can  ascertain  them,  for  only  a  few 
dates. 

In  1842,  two  years  before  the  passage  of  the  first 
Cheap  Trains  Act,  the  range  of  rates  was  from  about 
7  cents  per  passenger  per  mile  on  the  first-class  serv- 
ice to  2.88  cents  for  the  third  class,  with  an  average 


34  Railway  Transportation 

for  all  the  classes  of  practically  341  cents.  At  this  date 
the  railways  were  used  by  the  wealthier  people  only. 

In  1885  the  average  rates  were:  4  cents  for  Class  I, 
3  for  Class  II,  and  2  for  Class  III,  with  an  average 
of  all  services  of  a  little  more  than  2  cents.  The 
rate  for  each  class  except  the  third,  which  has  remained 
since  the  Cheap  Trains  Act  of  1844  at  practically 
2  cents,  has  had  its  variations.  That  for  the  first 
class  was  perhaps  lower  in  1885  than  the  average  of 
any  other  period  prior  to  1897.  The  standard  charges 
were  in  1897,  and  for  some  time  prior  to  that  date,  6 
cents  for  the  first  class,  4  for  the  second,  and  2  for 
the  third,  with  an  average  for  all  classes  of  about  2.8 
cents.  Since  1897  the  standard  rates  have  been  ap- 
proximately 4  cents  for  Class  I,  2.5  for  Class  II,  and 
2  for  Class  III,  with  an  average  of  about  2.57  cents. 
There  have  for  many  years  been  numerous  special 
tickets — season,  return,  and  working-man's — ,  and 
consequently  the  actual  average  has  been  lower  than 
indicated,  perhaps  as  low  as  1,75  to  2  cents. 

The  comparatively  low  average  charge  since  1844, 
especially  since  1879,  has  been  due  to  the  fact  that 
the  great  bulk  of  the  traffic  has  moved  in  the  third 
class  service ;  and  the  third-class  service  has  not  been 
poor.  Its  speed  and  comfort  have  been  remarkably 
good,  considerably  better  than  on  the  Continent, 
where  the  rate  has  quite  largely  been  about  the  same 
as  the  British.  The  fact  that  a  rich  country  like 
Great  Britain  should  have  a  third-class  passenger 
traffic  equal  to  practically  95%  of  the  total,  is,  we 
think,  a  fair  comment  upon  the  efficiency  of  such  a 
service.  The  British  service  of  all  classes  has  upon 
the  whole  been  excellent. 


Great  Britain  35 

(6)   Freight  Service  and  Rates 

The  problem  of  making  classifications  of  the  com- 
modities traffic  and  their  rates  has  on  the  British, 
as  on  the  other  railways,  been  very  complicated  and 
diffictdt.  Unlike  the  railways  of  Germany,  France, 
and  especially  of  the  United  States,  the  British  lines 
have  made  very  short  distance  hauls;  and  this  fact 
has  profoundly  influenced  British  rates.  The  British 
roads  have  also  had  a  larger  volume  of  finished  high- 
grade  commodities  to  haul,  and  much  of  this  has  by 
them  been  carried  at  a  high  rate  of  speed.  The 
British  railways  haul  much  as  freight,  which  in  the 
United  States  is  carried  by  the  express  companies, 
and  at  a  charge  much  greater  than  that  of  freight. 

In  the  making  of  rates,  the  British  lines  have, 
almost  from  the  beginning,  been  under  the  theoretical 
restriction  of  statutory  maxima.  The  early  charters 
prescribed  certain  maximiun  rates,  though  these  were 
not  very  comprehensive  or  specific.  And  early 
there  was  legislation  dealing  with  rates.  There  was 
enacted  in  1845  a  law,  known  as  the  Railway  Clauses- 
Consolidation  Act,  which  provided  that  all  charges 
should  be  within  the  maxima  prescribed  in  the  charters 
or  by  the  statutes  of  Parliament.  These  maxima 
now  became  stereotyped,  and  they  remained  so  until 
1891-92,  when  changes  were  made  by  the  Board  of 
Trade  and  Parliament.  The  railways  were,  during 
this  long  period,  practically  their  own  masters  in  the 
making  of  the  actual  rates  and  classifications.  The 
only  restriction  upon  them  was  that  the  actual  rates 
should  be  within  the  maxima;  and  they  were  for  the 
most   part   considerably   below   the   maxima,    even 


36  Railway  Transportation 

though  competition  between  railways  was  most  of 
this  time  ineffective. 

The  early  classification  of  the  goods  traffic,  which 
iwas  made  by  Parliament,  was  comparatively  simple. 
It  contained  only  about  forty  commodities,  grouped 
in  a  general  way  in  four  classes.  All  the  commodities 
which  were  not  then  in  existence,  and  which  should 
later  be  presented  for  transportation,  were  to  be 
classed  by  the  railways  themselves.  Since  the  early 
lines  were  local  in  their  traffic,  the  first  classification  and 
schedule  of  rates  applied  only  to  the  local  lines.  They 
were  fixed  upon  the  principle  that  a  railway  was  only 
a  private  toll-taker.  Such  questions  as  the  relation 
of  the  bulk  of  the  shipment  to  its  weight  and  damage- 
ability,  which  are  fundamentally  important  points 
to  public  carriers,  were,  of  course,  not  brought  under 
consideration. 

All  questions  of  the  classification  and  rates  of  the 
inter-line  traffic  were,  consequently,  matters  solely 
for  the  local  independent  lines.  This  traffic  soon 
became  important,  and  inter-line  classifications  and 
rates  became,  accordingly,  matters  of  great  vitality. 
A  clearing-house  was,  as  early  as  1842,  established  by 
the  railways,  for  the  sole  purpose  of  managing  this 
traffic;  and  from  this  date  until  1891  this  inter-rail- 
way organisation  was  the  real  master  in  rate  making 
and  in  classification.  It  was  during  all  this  period 
the  greatest  existing  force  toward  unity  and  uniformity 
for  the  whole  country,  even  though  the  process  of 
amalgamation  was  at  work  between  the  various  lines, 
and  though  it  had  no  power  over  the  classifications 
and  rates  of  the  purely  local  traflSc.  The  clearing- 
house was  well  organised  and  efficiently  administered. 


Great  Britain  37 

It  was  neither  an  executive  nor  a  judicial  body;  its 
chief  function  was  to  keep  the  accounts  of  the  traffic 
and  make  settlements  for  it,  to  keep  a  record  and  make 
reports  of  all  the  movements  of  cars.  This  body, 
for  its  own  guidance,  formulated  a  classification, 
known  as  the  "clearing-house  classification."  Its 
classification  was  at  first  in  many  particulars  different 
from  those  of  the  various  roads,  but  gradually  the 
railways  came  to  adopt  the  clearing-house  classifica- 
tion for  most  of  their  traffic. 

Under  the  machinery  of  this  inter-railway  organisa- 
tion, the  niunber  of  classes  was  increased  from  the 
3,  4,  or  5  of  the  prescribed  maxima  for  local  traffic 
to  7  for  the  inter-line  traffic ;  and  at  the  same  time  the 
number  of  commodities  grew.  In  1852  there  were 
748  inter-line  traffic  entries,  by  1870,  1621,  by  1880, 
2373,  by  1886, 2753 — all  this  the  result  of  co-operation 
working  for  many  years  between  the  railways. 

This  important  work  of  the  railway  clearing-house 
did  not,  however,  please  all  of  the  public.  There 
had  been  for  a  good  many  years  prior  to  1888,  when 
a  vitally  important  new  Railway  and  Canal  Traffic 
Act  was  passed,  a  demand  for  a  more  simple  classifica- 
tion, and  for  new  maximum  rates.  The  classification 
of  the  clearing-house  did  not,  of  coiirse,  cover  the 
local  traffic.  This  was  still  under  the  legal  classification 
made  during  the  early  years.  The  actual  rates,  while 
generally  below  those  prescribed  in  the  old  maxima, 
became  from  1875  a  matter  of  conflict  between  the 
shippers  and  the  railways.  The  maxima  did  not  cover 
the  rates  for  the  inter-line  traffic,  which  had  grown 
to  be  very  important.  They  did  not  definitely  cover 
the  terminal  charges,  and  over  this  point  there  was 


38  Railway  Transportation 

long  a  dispute.  They  were  in  many  different  docu- 
ments or  acts,  perhaps  as  many  as  3000.  The 
law  of  1888  contained  these  important  provisions: 
(i)  a  codification  of  the  existing  powers  of  the  rail- 
ways, which  were  hitherto  in  many  different  acts; 
(2)  the  revision  of  all  classifications;  (3)  the  fixing 
of  new  maximum  rates. 

By  this  law,  each  company  was  required  to  submit 
to  the  Board  of  Trade  a  revised  classification  and 
schedule  of  rates,  together  with  the  reasons  for  each. 
The  railways  in  1889  presented  the  clearing-house 
classification,  a  work  of  practically  fifty  years,  with 
the  fewest  modifications.  To  this  new  classification 
submitted  by  the  railways,  as  many  as  1530  different 
objections  were  raised  by  the  shippers.  The  Board 
of  Trade,  whose  duty  it  was  to  secure,  if  possible,  an 
agreement  between  the  roads  and  the  shippers, 
requested  a  series  of  conferences  between  them;  and 
as  many  as  124  meetings  were  held,  at  which  some 
modifications  of  the  proposed  classification  were 
made.  The  Board  of  Trade  then  heard  other  objec- 
tions. It  held  many  public  meetings,  sent  out  many 
thousand  inquiries  covering  a  wide  scope,  took  a  vast 
amotmt  of  evidence,  and  finally,  after  a  failure  to 
secure  an  agreement  between  the  shippers  and  the 
railways,  issued  in  thirty-five  "Provisional  Orders 'I 
the  new  classification  and  maximum  rates.  The 
railways  wovdd  not  accept  the  Board  of  Trade's 
classification  and  maxima,  and  they  were  then  sub- 
mitted to  Parliament  for  enactment  into  a  law. 
They  were  after  a  long  and  tedious  consideration 
by  a  joint  committee  of  the  two  houses,  and  after 
some    modification,    finally,    in    1891-92,    enacted. 


Great  Britain  39 

These  classifications  and  maximum  rates  went  into 
effect  on  the  first  of  the  year  1893. 

In  the  new  classification  and  maxima,  a  number  of 
commodities  were  not  specifically  mentioned;  and 
upon  these  the  railways  at  once  advanced  their  rates 
over  the  old  ones,  some  of  which  had  not  been  changed 
for  many  years,  perhaps  to  offset  the  losses  which 
would  come  from  operation  under  the  new  maxima. 
Such  action  brought  forth  much  objection  from  the 
shippers,  and  was  taken  under  consideration  by 
Parliament.  An  Act  was  in  1894  passed,  which  placed 
upon  the  railways  the  burden  to  prove  the  reason- 
ableness of  any  increases  over  the  actual  rates  in 
force  on  December  31,  1892,  in  case  of  complaint. 
Many  complaints  have  been  made,  and  the  Board  of 
Trade  has  effected  an  agreement  in  a  number  of 
them. 

The  new  classification,  that  of  the  "Provisional 
Orders"  of  1891-92,  provided  for  three  lettered  classes 
A,  B,  C,  and  five  numbered,  I,  II,  III,  IV,  V.  These 
were  to  be  uniform  for  the  whole  country.  The 
lowest  grade  traffic  was  placed  in  Class  A,  the  highest 
in  Class  V.  The  commodities  of  Classes  A,  B,  C 
were  to  be  shipped  largely  in  considerable  lots;  those 
of  Classes  I-V  were  of  high  value,  and  the  charges 
for  which  included  those  of  collection  and  delivery. 
This  classification,  like  the  old  one  to  an  extent,  is 
quite  complex.  Rates  since  the  passing  of  the  new 
maxima  have  been  largely  inelastic;  they  were  before 
this  date  very  adjustable.  The  new  maxima  have 
all  the  time  had  a  great,  even  a  controlling,  influence 
upon  actual  rates;  the  old,  rarely,  if  ever. 

The  British   railways,  while   they  have  operated 


40 


Railway  Transportation 


under  legal  maxima,  have  in  their  actual  rates  followed 
no  well-defined  standards.  The  maxima  were  prior 
to  1891-92  in  practically  all  cases  higher  than  the 
roads  desired  to  charge;  and  these  maxima  were,  as 
we  have  seen,  for  the  local  traffic  only.  The  influence 
of  the  old  maxima  upon  actual  rates  was,  therefore, 
very  slight.  What  has  been  the  effect  of  the  new 
maxima  upon  actual  rates?  This  question,  though  a 
very  difficult  one  because  of  the  inadequacy  of  statis- 
tics, we  shall  attempt  to  answer,  but  only  in  a  general 
way. 

The  "Provisional  Orders"  provided  two  sets  of 
maximum  rates:  (i)  terminal  charges,  which  were, 
with  one  local  exception,  to  be  uniform  for  the  whole 
country;  (2)  conveyance  charges,  also  largely  uniform. 

The  terminal  maxima  per  ton  (English)  were  as 
follows: 


Station  Charges 

Service  Charges 

(at  each  end) 

Loading 

Unloading 

Covering 

Uncovering 

shil.    pence 

s.       d. 

s.       d. 

s.       d. 

s.           d. 

A 

3 

_ 

_ 

_ 

_ 

k 

_ 

_ 

B 

- 

6 

- 

- 

- 

- 

- 

- 

- 

- 

C 

0 

- 

3 

- 

3 

- 

I 

- 

I 

1 

6 

- 

5 

- 

5 

- 

1.5 

- 

1-5 

II 

6 

— 

8 

— 

8 

— 

2 

— 

2 

III 

6 

I 

0 

I 

0 

- 

2 

- 

2 

IV 

6 

I 

4 

I 

4 

- 

3 

- 

3 

V 

6 

I 

8 

I 

8 

4 

4 

These  terminal  charges  did  not,  of  course,  cover 
the  collection  and  delivery  which  the  British  roads 


Great  Britain 


41 


made  for  practically  all  the  small-piece,  high-grade 
shipments.  These  charges,  after  many  years  of 
contention  between  the  railways  and  the  shippers, 
were  by  the  Act  of  1888  left  to  the  railways  to  deter- 
mine. The  only  restriction  that  was  placed  upon  the 
power  of  the  roads  was  that  these  charges  must  be 
reasonable;  and  the  final  judge  of  this  was  to  be  the 
Board  of  Trade  or  the  Railway  and  Canal  Commission. 
Just  what  part  of  the  total  charges  which  are  made  by 
the  railways  for  the  transportation  of  the  high-grade 
goods  belongs  to  collection  and  delivery,  we  cannot 
say. 

The  conveyance  rates  were  clearly  defined  in  the 
maxima  of  1891-92.  While  not  entirely  uniform  for 
all  the  systems,  their  variations  were  not  particularly 
important.  These  maximum  rates  per  ton  (English) 
per  mile  were  fixed  for  the  Great  Eastern,  a  fairly 
typical  system,  as  follows^: 


For  1st  20  miles, 
or  part  of 


For  next 
30  miles, 
or  part  of 


For  next 
50  miles, 
or  part  of 


For  remaining  dis- 

tance 

o.4od 

'.8c) 

0.55" 

i.ic) 

0.70 

;i.Ac) 
[20) 

1. 00" 

1.50" 

'3c) 

1.80"  ( 

3.6c) 

2.20" 

4.4c) 

2.50" 

.5c) 

A 
6 
C 

I 

II 
III 
IV 
V 


i.iSd  (2.3c) 

1.40"  (2.8") 

1.80"  (3.6") 

2.20"  (4.4") 

2.65"  (5.3") 

3.10"  (6.2") 

3.60"  (7.2") 

4.30"  (8.6") 


o.9od 
1.05" 
1.50" 
1.85" 
2.30" 
2.65" 
315" 
3-70" 


o.45d 
0.80" 
1.20" 
1.40" 
1.80" 
2.00" 
2.50" 
3.25" 


'  The  maxima  for  the  Great  Western  the  same  as  the  Great 
Eastern,  with  these  exceptions:  i-Sd  and  i.6d  for  Classes  A  and  B 
for  the  first  20  miles;  i.2d  for  Class  B  for  the  next  30  miles;  .35d 
for  Class  A  for  remainder  of  distance. 


42  Railway  Transportation 

The  actual  conveyance  rates,  though  we  have 
found  it  impossible  to  ascertain  them  exactly,  have, 
we  think,  usually  been  slightly  below  these  new 
maxima.  The  conditions  of  the  traffic  of  each  class 
have  always  been  considered;  and,  in  the  fixing  of 
rates,  the  railways  have  since  1891-92  been  compelled 
to  consider  three  particular  points:  (i)  the  statutory 
maxima;  (2)  the  relative  reasonableness;  (3)  the 
validity  of  the  increase.  The  actual  charges,  as  well 
as  the  prescribed  maxima,  have  followed  the  principle 
of  a  tapering  rate  up  to  the  distance  of  100  miles — 
for  most  of  the  British  hauls — ,  though  the  rate  per 
mile  has  not  always  proportionately  decreased  with 
an  increase  in  the  length  of  the  haul;  the  conditions 
and  value  of  the  traffic  and  the  vitality  of  the  com- 
petition have  played  an  important  part.  When  other 
things  have  been  equal  or  substantially  similar,  the 
actual  rates,  as  well  as  the  maxima,  have  decreased 
after  the  first  twenty  miles,  after  the  next  thirty, 
and  after  the  next  fifty. 

Much  of  the  British  freight  moves,  not  at  the 
standard  class  rates,  but  at  special  commodity  rates, 
which  are  materially  lower  than  the  class  charges. 
There  is  a  large  amount  of  this  commodity  rate 
traffic,  though  secret  rebating  is  scarcely  known  in 
the  United  Kingdom.  Perhaps  as  much  as  75%  of 
the  British  traffic  is  hauled  at  these  special  rates. 
The  railways  always  have  the  legal  right  to  offer 
such  reductions,  provided  that  they  are  not  prefer- 
ential to  certain  shippers.  They  cannot,  however, 
again  raise  them  unless  the  Railway  and  Canal  Com- 
mission give  permission.  Prior  to  1891-93  the  rail- 
ways made  frequent  reductions  in  rates  on  certain 


Great  Britain  43 

commodities,  in  order  to  experiment  with  the  traffic,  as 
to  whether  or  not  it  would  greatly  increase  with  a  cer- 
tain reduction  of  rate.  Since  1894  they  have  rarely 
done  this.  They  do  not  feel  that  they  can  make  an  ex- 
perimental rate  unless  they  are  practically  certain  of 
its  result  in  increased  traffic.  The  difficulty  in  again 
increasing  the  rate  is  too  great.  The  Act  of  1894, 
which  placed  the  burden  of  proof  of  reasonableness 
upon  the  railway  for  any  increase  of  rates  over  those 
in  force  on  December  31,  1892,  has,  therefore,  had  an 
important  influence  upon  rates.  This  influence  is 
shown  in  the  fact  that  during  the  decade  before  the 
period  of  rigid  government  regulation  of  rates  (1882 
-92),  they  declined  about  14%,  while  during  the 
next  decade  the  decrease  was  scarcely  more  than  2%. 
It  will  be  seen  from  the  above  table  of  maxima, 
and  the  actual  rates  are  not  much  less,  that  the 
British  freight  rates  are  high,  especially  for  short 
distance  hauls  and  for  the  more  valuable  commodi- 
ties. They  make  an  average  much  higher  than  that 
of  the  United  States.  While  for  short  distances,  say 
less  than  twenty-five  miles,  the  British  rates  are  upon 
the  whole  no  higher  than  those  in  the  United  States, 
if  quite  so  high,  for  long  distances  they  are  apparently 
about  three  times  as  much.  It  should,  however, 
be  remembered  that  the  British  lines  operate  under 
substantially  different  conditions  of  traffic.  They 
carry  much  traffic  as  freight,  which  in  the  United 
States  moves  by  the  passenger  train  at  high  express 
rates.  The  value  of  much  of  their  traffic  is  high, 
perhaps  upon  an  average  the  highest  in  the  world, 
certainly  much  higher  than  in  the  United  States,  and 
the  size  of  their  shipments  is  consequently  much 


44  Railway  Transportation 

smaller.  The  length  of  their  haul  is  also  very  short, 
with  an  average  of  from  thirty-one  to  fifty  miles, 
while  that  in  the  United  States  is  nearly  two-hundred 
and  forty;  and  the  terminal,  collection,  and  delivery 
costs  are  the  same  for  short  as  for  long  hauls.  The 
British  freight  service  is,  therefore,  not  so  expensive 
as  its  superficial  appearance  would  suggest.  Its 
efficiency  is,  moreover,  very  considerable,  though  it 
seems  capable  of  no  little  improvement,  as  for  instance 
in  the  capacity  of  many  of  its  cars  and  much  of  its 
terminal  facilities. 

For  References,  see  Chapta:  IV. 


CHAPTER   IV 

RAILWAY  TRANSPORTATION   IN   GREAT  BRITAIN 

(Concluded) 

THE  machinery  of  state  control  of  privately  con- 
structed and  managed  railways  has,  we  believe, 
had  its  fullest  development  in  Great  Britain;  and  the 
people  of  the  United  States  have  been  profoundly 
influenced  by  the  British  machinery.  On  the  Conti- 
nent, state  control  of  privately  operated  railways  has 
much  of  the  time  been  more  or  less  intimately  con- 
nected with  state  operation.  In  the  United  Kingdom, 
excepting  a  few  local  cases  in  Ireland,  there  has  been 
no  state  building  or  management.  Here  state  regula- 
tion, not  state  management,  has  been  the  custom. 

The  Ideals  and  Machinery  of  State  Control 

The  first  regulation  by  the  state  was  by  means  of 
the  charters,  which  were  by  Parliament  granted  to 
the  railway  companies.  There  was,  however,  no 
efficient  machinery  for  the  enforcement  of  the  charter 
provisions;  and,  had  there  been  an  enforcement  of 
these,  the  railways  would  not  have  been  seriously 
influenced.  Their  charters  were  in  a  large  way  mere 
copies,  most  mechanically  made,  of  those  of  the  older 
turnpike  and  canal  companies.     At  an  early  date 

45 


46  Railway  Transportation 

Parliament  began  to  see  that  the  railway  was  funda- 
mentally a  peculiar  form  of  transportation,  and  that 
it  must  be  dealt  with  as  a  separate  institution.  It 
was  then  becoming  clear  that  a  railway  was  essentially 
monopolistic,  and  that  consequently  the  efforts  of  the 
early  charters  to  maintain  competition  would  fail. 
A  general  form  of  charters  for  railways  was  prescribed 
in  1845.  Prior  to  this  date  the  charters  had  been 
granted  as  special  acts,  and,  since  the  railway  interests 
were  after  1828-30  comparatively  influential  in  Parlia- 
ment, these  gave  to  the  companies  almost  unlimited 
powers  and  rights.  State  control  by  means  of  such 
charters  could,  of  course,  amount  to  little ;  and  the 
control  which  came  through  the  later  charters  was 
only  slightly  more  efficient.  What  of  the  regulation 
by  parliamentary  statutes? 

The  British  companies  have  all  the  time  been 
regarded  as  perpetual  proprietors  of  the  lines,  and 
the  sole  purpose  of  the  state's  control  has  been  to 
secure  a  more  efficient  service  at  more  reasonable 
rates.  This  control  for  a  time  wavered  between  two 
methods:  (i)  regulation  by  the  maintenance  of  com- 
petition between  the  lines;  (2)  supervision  of  the 
transportation,  even  though  in  a  monopoly  form. 
During  the  first  twenty-five  years,  the  method  of 
competition  was  in  the  lead,  though  there  was,  in 
fact,  little  regulation.  Neither  method  had  during 
the  next  two  decades  a  well-defined  position.  Since 
1873  supervision  of  monopoly  railway  transporta- 
tion has  dominated,  and  the  control  has  been  more 
effective. 

The  first  important  Act  of  Parliament  looking  toward 
the  general  regulation  of  the  railways  was  passed  in 


Great  Britain  47 

1844 — the  Cheap  Trains  Act — and  it  had,  as  we  have 
seen,  a  decided  influence  upon  the  development  of 
the  third-class  passenger  service.  It  contained  no 
provision  for  the  regulation  of  any  other  part  of  the 
service.  During  the  next  year,  a  more  general  statute 
was  passed,  the  Railway  Clauses-Consolidation  Act, 
which  required  that  all  traffic  carried  the  same  dis- 
tance under  the  same  circumstances  should  have  the 
same  charge.  Its  influence  was,  however,  nullified 
by  the  fact  of  the  practical  non-existence  of  such 
traffic.  Commissions,  for  certain  terms,  were  created 
in  1844,  and  again  in  1846,  whose  specific  duty  it  was 
to  see  to  the  enforcement  of  the  provisions  of  the 
charters  and  of  the  general  statutes.  This  duty  had 
in  1840  and  1842  been  assigned  to  the  Board  of 
Trade,  an  old  administrative  body  which  already  had 
many  functions  to  perform.  The  commission  of 
1846,  appointed  for  a  term  of  five  years,  was  composed 
of  capable  and  honest  men,  but  it  had  practically  no 
powers,  and  consequently  did  little  service.  Unlike 
most  commissions,  it  had  very  little  work.  Prior 
to  1854,  the  government  had  little  influence  over  the 
railways;  it  had  actual  control  over  them  only  when 
they  made  applications  for  new  powers  and  privileges. 
Though  government  regulation  prior  to  this  date 
had  been  notably  ineffective,  the  foundations  of  a 
more  effective  control  were  in  the  process  of  forming. 
In  1854  these  were  made  more  extensive  and  secure, 
though  not  radically  changed.  The  Railway  and 
Canal  Traffic  Act  of  this  year  was,  nevertheless,  an 
important  improvement  over  the  earlier  laws.  It 
required  all  railways,  whatever  their  charter  rights 
and  powers,  to  supply  suitable  facilities  for  through, 


48  Railway  Transportation 

as  well  as  local,  traffic;  and  it  denied  them  the  right 
to  show  any  preference  to  shippers.  Special  machin- 
ery was  also  created  for  the  enforcement  of  these 
provisions.  Before  this  date  the  Board  of  Trade,  or 
a  commission,  had  been  authorised  to  enforce  the 
provisions  of  the  charters  and  laws,  but  without 
sufficient  power.  By  the  new  act,  the  superior  Court 
of  Common  Pleas  was  authorised  to  enforce  its  provi- 
sions. The  court  could,  upon  complaint  from  a 
shipper,  issue  a  writ  of  injunction;  and  it  had  the 
power  to  place  a  fine,  not  exceeding  £200  for  each 
act  of  disobedience  to  its  order. 

This  Act  of  1854  was  an  advance  over  the  former 
ones,  though  it  had  comparatively  Httle  influence. 
The  law  was  not  explicitly  definite,  and  the  machinery 
for  its  enforcement  was  not  efficient.  The  Court  of 
Common  Pleas  had  slight  disposition  to  consider  any 
but  the  legal  points  of  a  complaint.  It  knew  little 
of  the  technical  economic  issues,  and  these  were  by 
far  the  more  important  in  most  of  the  complaints. 
It  was,  therefore,  not  strange  that  the  shippers 
brought  few  complaints  before  such  a  coiut. 

Efforts  were  at  frequent  intervals  made  to  change 
the  Act  of  1854,  especially  the  machinery  of  its  execu- 
tion, but  little  was  done  until  1873.  A  royal  commis- 
sion in  1867  and  a  joint  committee  of  the  houses  of 
ParUament  in  1872  made  investigations,  and  their 
reports  were  influential  in  causing  the  passage  of  a 
new  Railway  and  Canal  Traffic  Act,  in  1873.  This 
new  law  brought  no  fundamental  modifications  of  the 
provisions  of  the  Act  of  1854;  its  chief  purpose  was  to 
create  new  machinery  for  the  enforcement  of  the 
provisions  of  that  Act.     It  created  a  commission  of 


Great  Britain  49 

three,  one  of  whom  must  be  a  lawyer,  one  a  man 
expert  in  railway  transportation,  and  none  of  whom 
could  in  any  way  be  interested  in  railway  or  canal 
stock.  All  the  members  were  to  devote  their  whole 
time  to  the  performance  of  the  special  tasks  of  the 
commission,  and  they  were  to  receive  the  large 
annual  salary  of  £3000  each.  The  duties,  which  by 
the  Act  of  1854  were  assigned  to  a  court  of  common 
pleas,  were  now  given  to  the  commission.  It  was  to 
hear  and  determine  all  cases  of  complaints  made 
under  the  provisions  of  the  Act  of  1854  and  subsequent 
ones,  and  complaints  could  now  be  made  without 
expense  to  the  shipper;  to  hear  and  approve,  or  disap- 
prove, all  cases  of  working  agreements  between  the 
railways,  a  duty  which  had  by  the  Act  of  1863  been 
assigned  to  the  Board  of  Trade;  to  arbitrate  between 
the  railways  in  all  cases  of  dispute;  to  require  the 
keeping,  at  each  station,  of  books  open  to  the  public ; 
to  fix  terminal  charges.  The  orders  of  the  commission 
were  enforcible  by  the  regular  courts.  Its  decisions 
were  apparently  final  as  to  the  facts — an  appeal  could 
go  only  upon  points  of  law — ,  but  in  reality  the  court 
could  compel  the  commission  to  "state  the  case." 
Though  it  had  little  power  as  an  executive  body,  it  was 
in  its  intent  a  court. 

The  Act  of  1873  was  for  five  years  only,  but  its 
term  was  extended  again  and  again  for  short  periods 
until  1888.  Such  short  extensions  meant,  however, 
uncertainty  and  lack  of  efficiency  and  dignity.  The 
commission,  which  was  created  by  this  Act,  and  which 
was  continued  by  its  extensions,  was  not  upon  the 
whole  particularly  successful.  To  quote  from  Presi- 
dent Hadley,  who  in  1885  said:   "The  commission 

4 


50  Railway  Transportation 

consisted  of  able  men — Sir  Frederick  Peel,  Mr. 
Price,  formeriy  of  the  Midland  Railway,  and  Mr. 
Macnamara;  the  last  named  died  in  1877  and  was 
succeeded  by  Mr.  A.  E.  Miller.  They  went  to  work 
with  energy,  and  in  a  spirit  which  promised  to  make 
the  experiment  a  signal  success."  This  success 
was  proved  by  subsequent  investigations  to  be  only 
slight.  This  was  not,  however,  the  fault  of  the 
commissioners  themselves,  but  of  their  powers  and 
the  scope  of  their  jurisdiction.  The  commission 
could  make  findings  and  decisions,  but  could  not 
force  compliance  with  its  orders.  It  had  neither  the 
power  nor  dignity  of  a  court ;  its  chief  officer  was  only 
a  layman,  not  a  judge.  The  railways  made  the 
claim  that  they  were  acting  within  their  charter 
rights,  and  that  the  commission  had  consequently  no 
jurisdiction  over  their  actions.  The  shippers  soon 
found  that  the  orders  of  the  commission  were  not 
enforced,  and  ceased  largely  to  make  complaints, 
though  to  make  these  was  not  directly  expensive  to 
them.  The  commission's  order  could,  of  course, 
cover  only  the  future  action  of  the  railways,  and  for 
past  violations  of  the  Act  of  1854  the  shipper  must 
ask  the  aid  of  the  ordinary  courts. 

The  chief  complaints  which  were  made  to  the  com- 
mission were  of  discriminations  in  rates,  not  of 
excessively  high  rates  in  themselves.  The  rates  for 
the  local  traffic  were  practically  never  above  the 
maxima  as  prescribed  in  the  charters,  and  those  of 
the  inter-railway  traffic,  for  which  there  were  no 
maxima  until  1891-92,  were  not  excessive.  The 
discriminations  in  rates,  which  were  complained  of 
before  the  commission,  were,  moreover,  for  the  most 


Great  Britain  51 

part  due  to  competition  between  the  railways  and 
the  coast- wise  vessels;  and  this  sea  competition 
existed  at  perhaps  three-fifths  of  all  the  railway 
stations. 

What  did  the  commission  do  with  these  complaints 
of  discrimination  in  rates?  President  Hadley  in 
1885  answered  this  question  correctly,  we  think, 
when  he  said:  "These  cases,  and  others  involving  the 
same  principles,  show:  (i)  That  the  commissioners 
are  acting  upon  the  theory  that  rates  should  be  based 
upon  cost  of  service.  (2)  That  they  propose  to  apply 
it  to  an  extent  which  has  proved  impracticable 
wherever  tried,  whether  by  Bismarck  or  by  the 
Grangers.  (3)  That  they  intend  to  use  it  as  a  protec- 
tion to  vested  rights,  against  the  levelling  tendencies 
of  the  railroad  system."  The  commission  did  not, 
however,  have  sufficient  power  to  enforce  such  a 
theory  of  reasonableness  of  rates,  at  least  to  any 
important  degree.  The  courts,  on  appeal,  did  not 
accept  it  as  wholly  valid;  and  the  parliamentary 
committee  of  1881-82,  after  much  investigation,  ruled 
against  it,  in  favour  of  differential  rates. 

The  Railway  and  Canal  Traffic  Act  of  1888  was 
passed  to  meet  the  defects  of  the  acts  of  1854  and 
1873.  This  law  either  repealed  or  incorporated  in 
itself  all  former  acts  dealing  with  railway  transporta- 
tion. The  experience  of  the  commission  of  1873 
had  clearly  pointed  out  the  weak  places  in  this  leg- 
islation, and  the  law  of  1888  merely  incorporated  all 
the  efficient  phases  of  the  former  acts  with  important 
additions.  It,  like  the  Act  of  1873,  brought  no  radical 
changes;  it  codified  all  former  laws,  provided  for  the 
formulation  of  new  and  uniform  statutory  maximum 


52  Railway  Transportation 

rates,  and  created  a  more  powerful  railway  and  canal 
commission. 

The  new  commission,  which  was  a  permanent  one, 
was  composed  of  five  members,  serving  a  term  of 
five  years,  two  appointed  by  the  crown,  three  ex-officio. 
Of  the  appointed  members,  one  must  be  an  expert 
in  railway  transportation.  The  ex-officio  members 
were  as  follows:  in  England,  the  Lord  Chancellor;  in 
Scotland,  the  Lord  President  of  the  Court  of  Session; 
in  Ireland,  the  Lord  Chancellor  of  Ireland.  These 
judges  could,  in  each  case,  designate  a  judge  of  the 
highest  court  to  serve  on  the  Railway  and  Canal 
Commission.  The  commission  at  work  must  be 
composed  of  the  two  appointed  members  and  one 
ex-officio,  who  should  be  the  presiding  officer,  and  who 
in  England  should  be  the  English  judge,  in  Scotland, 
the  Scottish,  and  in  Ireland,  the  Irish.  The  appointed 
members  should  devote  all  their  time  to  the  work 
of  the  commission,  the  ex-officio  member  only  a  few 
weeks  in  a  year.  The  appointed  members  were  made 
the  judges  of  the  facts;  the  ex-officio,  the  authority 
as  to  the  law,  though  even  here  the  lay  members 
have,  by  their  opinions,  considerable  influence.  The 
commission  was  made  a  court  of  record,  and  its  seal 
was  to  be  judicially  noticed. 

This  new  commission  was  given  all  the  power 
which  the  former  one  had,  and  more.  It  was  to  hear 
and  determine  cases  of  complaint  upon  rates,  though, 
since  it  was  a  court,  it  should  not  be  directly  interested 
in  making  rates;  this  was  left  to  the  railways,  the 
Board  of  Trade,  and  Parliament.  It  was  to  order 
proper  facilities  for  managing  the  traffic;  to  hear  and 
decide  points  in  dispute  as  to  the  terminal  charges ;  to 


Great  Britain  53 

award  damages  to  aggrieved  shippers;  to  act  as  arbi- 
trators in  disputes  between  the  railways,  in  case  the 
Board  of  Trade  should  fail  to  secure  a  settlement  of 
them.  Its  orders  were  declared  final ;  no  appeal  to  the 
superior  court  was  allowed  as  to  the  facts  of  the  locus 
standi  of  the  complainant.  Since  the  questions  of  the 
reasonableness  of  rates  are  so  difficult,  and  at  the  same 
time  so  important,  the  commission  was  specifically 
empowered  to  determine  what  constituted  reason- 
ableness, and  to  decide  all  cases  of  preference  of  rates. 
It  was  not,  however,  left  entirely  to  the  commission 
to  decide  upon  preference  in  the  long  and  short  haul ;  it 
was  declared  that  no  higher  charge  could  be  made  for  ■ 
the  shorter  than  for  the  longer  haul  over  the  same  line, 
at  the  same  time,  and  in  the  same  direction. 

The  terminal  charges  were  now  for  the  first  time 
designated  as  distinct  from  those  for  haulage.  It  had 
long  been  a  matter  of  contention  between  the  railways 
and  the  shippers  as  to  whether  the  old  maxima 
included  the  terminal  charges.  The  railways  had,  in 
this  dispute,  claimed  that  these  charges  were  not  cov- 
ered by  the  old  statutory  maxima;  and  the  right  of 
the  roads  to  collect  these  as  extra  charges  was  in  1885 
granted  by  the  Court  of  the  Queen's  Bench.  The 
law  of  1888  also  allowed  these  as  extra  charges,  but 
provided  for  the  formulation  by  the  Board  of  Trade 
and  Parliament  of  statutory  terminal  maxima.  Such 
maxima  were  finally,  in  1891-92,  formulated  and 
declared  by  the  superior  court  to  be  valid.  Ovef  the 
charges  which  could  be  made  by  private  terminals,  as 
distinct  from  those  of  the  railways,  the  commission 
was  empowered  to  pass  judgment. 

The  end  of  specific  and  comprehensive  legislation 


Railway  Transportation 

was  not  yet.  Another  decided  step  was  made  in  1894, 
when  another  Railway  and  Canal  Traffic  Act  was 
passed  to  supplement  those  of  1873  and  1888.  This 
new  law  was  more  complete  in  its  treatment  of  actual 
freight  rates.  The  Board  of  Trade  and  Parliament 
had  in  1891-92,  tmder  the  authority  of  the  Act  of  1888, 
formulated  and  enacted  statutory  maximiun  rates  for 
terminals  and  for  conveyance,  which  should  become 
effective  at  the  beginning  of  1893.  Because  of  these 
acts,  the  railways  made  certain  increases  in  their 
actual  rates.  The  law  of  1894  established  a  basal 
year,  and  declared  that  all  rates  which  were  in  force 
on  December  31 ,  1892,  were  presumptively  reasonable, 
and  that  the  burden  should  rest  upon  the  railway,  not 
upon  the  shipper,  to  prove  that  increases  above  those 
of  the  basal  year  were  reasonable.  Such  a  law  made 
it  all  the  easier  for  the  commission  to  control  rates. 

What  has  been  the  work  of  the  new  commission? 
During  the  first  decade  of  its  operation,  the  commis- 
sion considered  two  important  classes  of  cases:  (i) 
Those  which  involved  increases  of  rates,  in  order  to 
bring  to  an  end  an  anomalous  condition ;  and  in  these 
cases  the  commission  ruled  in  favoiu"  of  the  railways. 
(2)  Those  in  which  the  railways  claimed  that  an 
increase  in  the  cost  of  operation  necessitated  an 
increase  in  certain  rates.  Wherever  the  railways 
proved  that  the  increase  in  the  cost  of  service  was 
presumably  permanent  and  in  fair  proportion  to  the 
increase  of  rate,  the  commission  allowed  the  increase. 

The  commission  has  during  its  entire  life  heard 
many  complaints,  the  decisions  in  which  have  been 
both  favourable  and  tmfavourable  to  the  shippers. 
In  the  cases  of  complaint  of  excessive  or  preferential 


Great  Britain  55 

rates,  the  commission  has  laid  down  no  dogmatic  or 
rigid  rule  of  judgment.  It  has  been  eminently  prac- 
tical. It  has  also  considered  many  requests  from  the 
railways  for  permission  to  amalgamate  or  to  form 
working  agreements.  Here  again  it  has  been  prac- 
tical; it  has  been  guided  by  the  points  of  practical 
expediency  in  terms  of  public  justice  and  welfare. 
Its  members  have  upon  the  whole  been  men  of  great 
ability  and  devotion  to  public  service.  They  have  as 
a  commission  been  in  a  large  way  judicial,  rather  than 
executive,  but  they  have  never  followed  precedent  too 
closely.  A  commission  can  never  regulate  efficiently 
such  an  immensely  difficult  and  dynamic  a  business 
as  railway  transportation  by  following  slavishly 
former  decisions,  or  by  pursuing  vigorously  rigid 
standards  of  reasonableness. 

The  preference  involved  in  the  long  and  short  haul 
has  been,  in  Great  Britain  as  in  the  United  States,  a 
subject  of  contention.  The  new  commission,  just  as 
the  old,  found  this  a  most  difficult  matter,  and  one  of 
the  most  important  of  its  decisions  has  been  upon  this 
subject.  In  this  it  ruled,  and  the  court  sustained  the 
ruling,  that  the  fact  of  the  existence  of  effective  com- 
petition, rail  or  water,  at  the  more  distant  place,  and 
of  its  non-existence  at  the  intermediate  locality,  was 
justification  for  a  smaller  rate  for  the  longer  haul — a 
practical  decision,  rather  than  one  decided  by  rigid 
uniformity.  ^ 

The  cases  of  preference  in  rates  between  the  domes- 
tic and  the  foreign  shipper  have  been  important,  as 
well  as  complicated.     The  law  of  1873  forbade  unrea- 

'  Tiinm  &  Sons  vs.  N.  E.  Ry.,  etc 


56  Railway  Transportation 

sonable  preference  to  any  shipper,  and  so  did  the  Act 
of  1888.  But  what  constitutes  the  unreasonableness? 
Upon  this  point  neither  law  was  clear.  The  commis- 
sion has,  therefore,  found  this  a  most  difficult  matter, 
and  its  decisions  upon  it  are  not  entirely  clear  and 
consistent.  It  has  held  that  unreasonableness  of 
preference  in  any  form  is  always  a  matter  of  fact,  not 
of  general  rule,  and  that  it  must  be  proven.  May 
competition  be  the  controlling  factor?  The  commis- 
sion, in  an  important  decision,  Budd's  case,  in  1890, 
ruled  that  water  competition  was  not  of  itself  a 
sufficient  justification  of  preference  in  rate  to  foreign 
goods  over  domestic.  In  this  case  the  commission 
had  the  idea  that  the  public  welfare  was  something 
more  than  a  matter  of  two  places.  Such  a  ruling  was, 
however,  not  the  final  one  of  the  commission.  Two 
years  later,  in  the  Liverpool  Com  Traders'  Association 
vs.  the  Great  Western  Railway,  it  practically  reversed 
this  decision.  It  was  now  held,  though  not  by  a 
unanimous  opinion,  that  water  competition  might 
under  certain  conditions  justify  the  preference  in  rate. 
The  change  of  view  of  the  commission  was  due  in 
part  to  a  decision  of  the  court,  which  ruled  that  public 
welfare  calls  for  the  power  of  effective  competition, 
and  that  the  public  interest  is  largely  that  of  two 
localities. 

The  ruling  of  the  commission  in  1892  has  been  for 
the  most  part  its  general  guide  in  cases  of  preferential 
rates  for  imports  and  exports.  In  a  most  important 
case,  the  Mansion  House,  of  1895,  water  competition 
was  an  important  factor  in  the  justification  of  a  pre- 
ference in  favour  of  imports  over  domestic  goods, 
perhaps  the  controlling  one,  though  the  nominal  one 


Great  Britain  57 

was  the  cost  of  service.  Again,  in  1903  and  1904, 
water  competition  was  recognised  as  a  justification  for 
a  smaller  rate  for  the  longer  distance  traffic,  provided 
it  was  for  export.  The  commission  in  these  cases  held 
that  the  smaller  rate  was  justified  on  the  ground  that 
it  was  necessary  to  secure  the  traffic. 

The  question  of  the  reasonableness  of  rates  per  se, 
which  had  been  a  very  perplexing  one  for  the  British 
Government,  as  well  as  the  British  railways  and  ship- 
pers, was  greatly  clarified  by  the  acts  of  1891-92.  In 
these  laws,  ParUament  enacted  into  statutes  the 
maxima  which  the  Board  of  Trade  had,  after  long  and 
difficult  labours,  formulated.  These  maxima,  which 
only  the  Board  of  Trade  and  Parliament  could  formu- 
late and  enact,  became  at  once  the  standard  of  reason- 
ableness for  the  commission,  as  well  as  the  shipper. 
The  commission  was  not  created  to  make  rates  in  the 
first  instance;  it  could  only  declare  a  certain  com- 
plained-of  rate  too  high,  and  by  its  order  fix  the 
standard  for  that  specific  rate.  The  new  maxima 
established  standards  for  all  class  rates,  beyond  which 
any  rate  would  be  prima  facte  unreasonable  and  illegal. 
In  1894  Parliament  took  another  important  step 
toward  establishing  all-comprehensive  standards  of 
reasonableness.  It  now  declared  that  the  actual  rates 
which  were  in  force  on  December  31,  1892,.  should  be 
supplementary  maxima.  There  was  only  one  vital 
difference  between  the  supplementary  maxima  of  1894 
and  the  maxima  of  1891-92.  The  maxima  were  an 
absolute  limit,  beyond  which  rates  could  not  legally 
go;  the  actual  rates  might,  if  the  commission  so  per- 
mitted, be  higher  than  the  supplementary  maxima. 

The  tasks  of  the  commission  became,  therefore, 


58  Railway  Transportation 

more  simple  and  easy,  though  even  yet  they  were 
difficult.  The  number  of  complaints  of  tmreasonably 
high  rates — that  is  of  rates  higher  than  the  supplemen, 
tary  maxima — has  been  considerable.  The  commis- 
sion  in  its  consideration  of  them  has  found  it  difficult 
to  formulate  a  clearly  defined  poUcy.  It  has  at  times 
ordered  the  railways  to  base  their  proof  of  reasonable- 
ness of  increase  of  rate  upon  an  increase  in  the  cost  of 
service,  but  this  basis  of  rate  making  has  not  been 
closely  or  consistently  followed,  either  by  the  railways 
or  the  commission. 

The  work  of  the  Railway  and  Canal  Commission 
has  upon  the  whole  been  significant!}'  important  and 
successftil,  though  it  has  formulated  few  general  rules 
of  action.  It  has  been  sanely  practical.  It  has 
gradually  proven  its  power  of  effective  control  over 
railway  transportation.  The  certainty  of  its  juris- 
diction and  power,  and  the  sanity  and  dignity  of  its 
actions,  have  year  after  year  made  its  influence  felt 
and  respected  throughout  the  United  Kingdom.  This 
commission,  which,  unlike  the  Interstate  Commerce 
Commission,  is  a  court,  has  lived  a  dignified  life.  Few 
of  its  decisions  have  been  reversed  by  the  higher 
courts  on  appeal.  It  has  also  performed  its  tasks 
with  fair  rapidity.  But  still  there  is  at  the  present  a 
strong  demand  on  the  part  of  the  shipper  for  a  more 
rapid  and  decisive  procedure,  as  well  as  a  less  expensive 
one,  of  state  control.  The  Board  of  Trade,  which  as 
an  administrative  body  has  much  to  do  with  the 
state's  regtdation  of  transportation,  is  tremendously 
busy  with  many  other  tasks.  The  Railway  and 
Canal  Commission  is  also  busily  engaged,  especially 
its  ex  officio  member,  its  presiding  officer,  who,  as  a 


Great  Britain  59 

judge  of  the  regular  superior  court,  has  many  other 
duties. 

The  machinery  and  ideals  of  the  British  state  con- 
trol of  railways  are  not  yet  complete,  but  by  far  the 
larger  work  of  their  creation  has,  we  think,  been 
performed.  Great  Britain  has  been  the  world's 
pioneer  in  the  introduction  of  this  form  of  transporta- 
tion; she  has  been  its  most  perfect  example  of  the 
strictly  private  railway  corporation ;  she  has  been  its 
greatest  achievement  of  private  ownership  and  opera- 
tion. And  it  would  be,  to  say  the  least,  most  unwise 
for  the  people  of  the  United  Kingdom  to  exchange  their 
comparatively  complete  and  efficient  system,  which 
has  been  created  and  perfected  by  private  enterprise, 
under  the  supervision  of  the  state,  for  the  system  of 
government  ownership  and  management,  the  efficiency 
of  which  for  the  British  is  at  least  problematic. 

References  on  the  British  Railways 
(See  note  to  References  to  Chapter  I.) 

The  Railway  and  Canal  Traffic  Acts  .  . .  ,  1903,  London. 

Annual  Reports  of  the  English  Railway  and  Canal  Commission, 
London. 

Railway  Returns  for  England,  Wales,  Scotland,  and  Ireland, 
1 854-1906,  London. 

Railway  Conference — Report  of,  1908,  London. 

Reports  of  Royal  Commissions  or  of  Select  Committees  (on 
Railways),  1846,  1852,  1858,  1863,  1865-66,  1872,  London. 

Reports  of  the  Royal  Commission  on  Canals  and  Waterways, 
1906,  London. 

W.  H.  Macnamara:  A  Digest  of  the  Law  of  Carriers  of  Goods 
and  Passengers  .  .  .  ,1888,  London. 

G.  Cohn:  Untersuchungen  iiber  die  Englische  Eisenbahnpolitik, 
3  vols.,  1874-83,  Leipzig. 


6o  Railway  Transportation 

W.  M.  Acworth:  The  Railways  of  England,  1900,  London. 

W.  M-  Acworth:  TTte  Elements  of  Railway  Economics,  1905, 
Oxford. 

W.  M.  Acworth:  The  Railways  and  the  Traders,  189 1,  London. 

S.  J.  McLean:  The  English  Railway  and  Canal  Commission  0} 
1888  ("Q.  J.  Econ.,"  Nov.,  1905). 

A  rchiv  fur  Eisenbahnwesen,  Berlin. 

The  Railway  News,  London. 

F.  Ulrich:  Das  Eisenbahntarifwesen  im  AUg 1886,  Berlin. 

W.  E.  Weyl:  The  Passenger  Traffic  of  Railways,  1901,  Philadel- 
phia. 


CHAPTER  V 

RAILWAY  TRANSPORTATION  IN  FRANCE 

THE  French  have  next  to  the  British  been  the 
leaders  of  Europe  in  the  private  operation  of 
railways,  and  for  this  reason  the  treatment  of  their 
lines  comes  immediately  after  that  of  the  British. 
Though  an  advanced  and  intelligent  people,  the 
French  were  slower  in  making  use  of  the  new  form  of 
transportation  than  the  people  of  Great  Britain  or  of 
the  United  States.  They  were  timid  and  hesitating; 
they  were  sceptical  as  to  its  results.  French  capital 
was  not  eager  to  invest  itself  in  railways,  and  the  state 
was  not  active  in  granting  the  necessary  charter  rights 
and  powers.  It  was  only  after  this  form  of  trans- 
portation had  elsewhere  proven  its  decided  excellence 
and  value,  that  it  became  at  all  attractive  to  the 
French,  Their  highways  were  certainly  in  an  excel- 
lent condition,  and  their  canals  were  rapidly  becoming 
so.  And  the  railways  must,  like  everything  else  of  a 
public  nature  in  France,  be  inaugurated  according  to 
a  comprehensive  scheme,  in  which  the  government 
should  play  an  important,  if  not  the  leading,  r61e. 
For  so  long  had  the  individual  waited  upon  the  state 
to  take  the  initiative,  that  he  was  not  in  this  new 
industry  willing  to  assume  all  its  risks,  if  indeed  the 
state  might  grant  him  the  necessary  rights  and  powers. 

6l 


62  Railway  Transportation 

That  the  railways  in  France  should  from  the  beginning 
have  been  vitally  related  to  the  state,  though  largely 
private  as  to  ownership  and  operation,  is  exactly  what 
should  have  been  expected;  they  began  as  a  compro- 
mise between  the  individual  and  the  government,  and 
so  they  have  quite  largely  continued  to  be  to  this  day. 

(a)  Development  of  the  Lines — Private  or  State 

It  was  very  early  seen  by  the  French  that  the  rail- 
way would  soon  become  largely,  if  not  completely, 
monopolistic.  In  this  particular,  the  French  had 
clearer  visions  than  the  British  or  the  Americans,  if 
not  all  other  peoples.  Should  such  an  industry'  be  left 
to  private  enterprise  under  government  supervision? 
Should  it  at  once  become  a  state  industry?  These 
two  questions  were  almost  at  the  beginning  of  the 
railways  in  France  careftdly  considered ;  and  the  more 
practical,  and,  as  we  think,  more  efficient,  view  won. 
This  answer  did  not,  however,  mean  completely 
private  ownership  and  control.  The  state,  as  well  as 
private  indi\'iduals,  was  to  construct  the  lines,  and  the 
state  was  to  super\nise  their  operation.  This  co-opera- 
tion between  private  enterprise  and  the  state  assumed 
the  form  of  a  convention  between  the  two  parties, 
which  clearly  defined  the  part  each  should  have  in  both 
the  construction  and  the  operation. 

The  first  concession  for  a  railway  was  made  by  the 
state  in  1823,  for  a  horse-car  line.  By  this,  the 
government  granted  to  a  private  company  consider- 
able powers  and  perpetual  rights,  with  no  reservation 
of  state  repvirchase.  Other  concessions  were  between 
1823  and  1827  made,  in  order  to  secure  more  eflSdent 


France  63 

and  cheap  transportation  between  the  centres  of 
population  and  the  waterways — the  Loire  and  the 
Rhone.  The  first  locomotive  railway  did  not,  how- 
ever, come  until  in  1832.  The  concessions  were  now 
for  the  steam,  not  the  horse,  railway;  and  in  their 
granting  there  was  always  some  idea,  though  usually 
slight,  of  a  state  system  of  railways.  For  a  time,  in 
1836-40,  the  debate  over  the  question  as  to  whether 
the  railways  should  be  operated  by  private  companies 
or  by  the  government  became  a  matter  of  great 
interest,  especially  to  the  Chambers;  and  it  was  not 
until  1842  that  the  question  was  clearly  answered, 
and  then  in  favour  of  private  operation.  The  con- 
cessions which  were  made  after  1833  always  included 
a  provision  of  repurchase  by  the  government,  if  the 
public  interest  should  demand  it,  and  in  1835  the 
time  of  the  grant  was  limited  at  most  to  ninety- 
nine  years. 

The  period  prior  to  1842  was,  therefore,  one  of 
considerable  indecision.  Extensive  surveys  were  made 
by  the  state,  and  plans  were  formulated,  but  while 
Great  Britain  and  the  United  vStates  were  actively 
building  lines,  even  though  without  system  and  plan, 
France  was  practically  waiting,  though  her  capital 
was  abundant.  During  the  first  decade  of  the  French 
steam  railways,  only  564  kilometres  (350  miles)  were 
constructed.  The  foundations  were,  however,  during 
these  ten  years  laid,  and  when  the  state  clearly  formu- 
lated its  policy,  in  a  statute  of  1842,  railway  building 
began  in  earnest  and  with  enthusiasm.  This  law  of 
1842  laid  the  foundations  of  the  French  railways,  even 
as  they  exist  to-day.  It  provided  for  the  construction 
of  nine  new  lines,  seven  of  which  should  radiate  from 


64  Railway  Transportation 

Paris,  and  one  should  connect  Bordeaux  and  Mar- 
seilles, one  Mulhausen  and  Dijon.  These  lines  still 
constitute  the  great  arteries  of  the  French  railways. 
The  concessions  which  were  made  to  the  companies 
were  comprehensive  as  to  the  rights  and  duties  of  each 
party — the  company  and  the  state ;  and  they  contained 
a  plan,  for  the  whole  kingdom,  of  national,  local,  and 
private  aid.  The  government  was  to  build  the  road- 
bed and  the  structures.  The  company  was  to  pay  for 
the  construction  of  the  track  and  its  appurtenances,  as 
well  as  to  supply  the  rolling  stock  and  to  maintain  the 
operation.  The  local  authorities  were  to  pay  two- 
thirds,  the  state  one-third,  of  the  cost  of  the  real 
estate  needed  for  the  way,  a  provision  which  was  in 
1845  changed  to  the  ejffect  that  the  national  govern- 
ment should  pay  all  of  this.  At  the  expiration  of  the 
concessions,  the  way  and  equipment  were  to  be  taken 
over  by  the  state  upon  payment  to  the  company  for 
the  value  of  the  equipment. 

The  plan  of  1842,  which  covered  ali  phases  of  the 
technical,  economic,  and  legislative  aspects  of  railway 
transportation,  has  continued  to  the  present  with  only 
a  slight  modification  here  and  there,  so  consistently 
and  comprehensively  was  it  drawn.  Its  authors,  the 
government  engineers,  laid  out  the  lines  with  the  view 
of  permanence  and  the  minimum  of  waste.  They 
permitted  no  wastes  of  competition  between  the  lines ; 
they  were  believers  in  the  monopoly,  not  the  competi- 
tive, principle  of  railway  transportation. 

Under  the  influence  of  this  co-operation  of  the  state 
and  private  enterprise,  of  the  cost  of  which  the  state 
should  bear  at  least  one  half,  if  not  more,  railway 
building  became  active.     As  many  as  thirty-three 


France  65 

companies  were  chartered,  and  their  lines  increased 
in  length  until  they  had  by  1847-48,  when  a  crises 
and  a  political  revolution  brought  them  to  a  standstill, 
a  mileage  of  11 94  (1927  km.).  The  period  of  depres- 
sion that  followed  the  economic  and  political  dis- 
turbances made  severe  tests  of  the  ability  of  the  newly 
constructed  lines;  and,  since  speculation  had  played 
too  large  a  part  in  their  building,  most  of  them 
appealed  to  the  state  for  greater  assistance.  Capital 
could  not  be  secured  by  them  for  the  necessary 
extensions.  The  state  must  protect  the  funds  of  the 
companies  from  great  depreciation,  since  upon  these « 
the  building  of  lines  primarily  rested ;  and  it  agreed  to 
guarantee  the  interest  on  them. 

It  was  not  until  the  coming  of  the  Second  Empire, 
in  1851-52,  that  railway  extension  again  became 
active.  The  new  government  was  eager  to  please 
certain  financial  interests,  and  to  placate  others,  and 
in  1852  it  made  important  extensions  in  the  time  of 
the  concessions,  from  forty  years  to  ninety-nine.  The 
state  now  estimated  that,  because  of  the  expected 
growth  in  the  traffic,  it  would  by  1951  become  the 
owner  of  all  the  railways  without  paying  for  more  than 
the  equipment.  The  companies,  in  exchange  for  this 
extension  of  their  concessions,  agreed  to  bear  all  the 
expense  of  the  construction  of  the  branch  lines,  which 
were  needed  as  feeders  of  the  main  lines.  The  main 
lines  had,  as  we  have  seen,  been  constructed  partly  at 
the  expense  of  the  state,  but  the  branch  lines  must 
now  be  built  entirely  at  the  expense  of  the  companies, 
even  though  they  might  not  for  many  years  be 
profitable.  The  companies  had  by  1857,  when  a 
crisis  in  business  and  credit  of  a  remarkable  extent  and 


66  Railway  Transportation 

intensity  occurred,  expended  more  than  $400,000,000 
upon  these  lines.  Perhaps  this  much  more  would  be 
needed  for  their  completion,  and  the  companies  now 
became  unable  to  borrow  the  capital.  The  state 
was  again  appealed  to  for  further  aid ;  the  credit  of  the 
companies  must  be  sustained,  or  the  necessary  lines 
could  not  be  built.  This  situation  led  to  another 
extension  of  the  concessions,  which  was  done  by  the 
conventions  of  1859. 

The  state  now  entered  into  contract  with  six  great 
companies.  The  number  of  railway  corporations  had, 
as  we  have  seen,  been  greater,  but  the  process  of  con- 
solidation into  eleven,  into  nine,  and  now  into  six,  had 
been  an  easy  one,  since  no  parallel  lines  had  been 
allowed.  The  purpose  of  these  contracts  or  conven- 
tions was  to  consolidate  and  strengthen  the  credit  of 
the  corporations,  at  the  least  possible  burden  to  the 
state.  In  these  conventions,  a  separation  of  the  old 
and  new  lines  was  made.  The  state  made  no  guarantee 
of  interest  upon  the  then  existing  lines,  but  upon  the 
new  ones  it  agreed  to  guarantee  to  the  companies 
until  the  year  19 14  a  net  revenue  sufficient  to  make 
the  interest  on  the  bonds  and  a  fund  for  sinking  the 
costs  of  construction — ^4.65%.  The  net  revenue  of  the 
old  lines  was  reserved  to  the  companies  until  it  became 
large  enough  to  bear  the  interest  on  the  bonds  and  pay 
a  dividend  to  the  shareholders  practically  as  large  as 
that  received  by  them  during  the  last  five  years.  In 
case  the  net  revenue  from  the  old  lines  was  larger  than 
this,  the  excess  should  be  used  for  the  new  lines,  to  pay 
the  interest  on  their  construction  bonds;  and  the 
government  guaranteed  to  pay  all  of  this  interest  only 
so  long  as  there  should  be  no  such  excess  of  net  revenue 


France  67 

from  the  old  lines.  The  amounts  advanced  by  the 
government  in  paying  this  interest  on  the  bonds  of  the 
new  lines  were  in  no  sense  gifts.  They  were  only 
advances  to  the  companies,  and  were  to  be  repaid  to 
the  state,  with  4%  interest,  as  soon  as  the  net  earnings 
from  both  old  and  new  lines  exceeded  the  revenue 
reserved  to  the  companies.  When  these  advances, 
with  interest  upon  them,  were  fully  repaid  to  the 
state,  the  earnings  above  a  certain  per  cent,  were  to 
be  divided  between  the  companies  and  the  state. 

The  conventions  of  1859  remained  in  force  until 
1883,  though  with  numerous  slight  modifications. 
Other  concessions  were  during  this  period  granted, 
but  they  dealt  solely  with  minor  lines.  The  conven- 
tions between  the  state  and  the  six  large  companies, 
five  of  which  operated  from  Paris,  and  one  in  Southern 
France,  brought  them  soUd  credit,  and  consequently 
much  extension  of  their  lines.  There  were  in  i860 
only  5907  miles  (9528  km.);  by  1870  the  mileage  had 
practically  doubled.  Some  of  this  new  construction 
was  done  by  the  big  companies,  a  part  by  the  small 
corporations,  which  were  chartered  for  the  building  of 
branch  lines  through  the  more  rugged  and  poorer 
portions  of  the  kingdom.  The  Franco-Prussian  War, 
1870-71,  was  so  disastrous  to  France,  that  railway 
building  came  for  a  time  to  a  complete  standstill.  It 
was  very  sHght  in  fact  until  1878. 

Apart  from  the  far-reaching  effects  of  the  war,  there 
were  other  influences  at  work  to  check  the  growth  of 
the  railway  mileage  and  its  equipment.  The  conven- 
tions of  1859  proved  themselves  to  be  of  greater  advan- 
tage to  the  companies  than  to  the  state  treasury  or 
the  shippers.     By  these  concessions,  the  big  compan- 


68  Railway  Transportation 

ies  were  given  a  practically  complete  monopoly  of  their 
respective  territories.  Competition  in  their  local 
traffic  hardly  existed,  and  in  their  through  traffic  it  was 
not  very  vigorous,  though,  since  a  part  of  this  traffic 
could  move  by  foreign  railways  or  by  the  waterways, 
the  companies  were  active  in  soliciting  new  through 
business.  They  did,  however,  little  to  increase  their 
purely  local  non-competitive  traffic.  This  was  not 
because  of  the  fact  of  their  monopoly  power  over  it, 
but  because  of  other  provisions  in  the  conventions. 
The  railways  had  too  little  incentive  to  develop  this 
traffic.  The  guarantee  of  interest  which  they  had 
from  the  state  caused  their  property  to  possess  much 
value,  though  it  did  only  a  small  volume  of  business. 
Because  of  such  provisions,  some  of  the  lines  did 
practically  nothing  to  repay  their  debts  to  the  state; 
they  relied  to  a  great  extent  upon  their  guarantees. 
And,  too,  most  of  the  new  branch  lines  that  were  built 
by  the  small  companies  became  involved  in  financial 
difficulties,  in  some  cases  diffictdties  so  great  as  to 
assume  the  proportions  of  a  crisis.  They  had  been 
constructed  through  sections  which  were  slightly 
developed,  and  which  still  had  much  of  the  self-suffic- 
ing spirit  of  economic  life.  The  government  was, 
therefore,  appealed  to  for  assistance,  and  in  1877-78  it 
purchased,  perhaps  in  part  for  military  reasons,  the 
lines  of  ten  of  the  small  companies  that  were  operating 
in  the  Western  and  South-western  portions — a  total 
mileage  of  1612  (2600  km.),  about  half  of  which  was  of 
purely  local  interest,  none  of  which  was  profitable  in 
itself. 

The  lines  which  were  taken  over  by  the  government 
in  1877-78  had  been  built  largely  according  to  a  plan 


France  69 

of  1865,  which  provided  for  the  construction  of  local 
lines  independent  of  the  big  companies,  located  for  the 
most  part  in  the  Northern  and  South-western  sections. 
These  lines  were  subsidised  by  the  local  authorities, 
and  it  was  intended  that  they  should  never  consolidate 
so  as  to  break  the  monopoly  of  the  large  systems. 
When  the  Empire  fell,  and  consequently  the  central 
government  became  weak,  the  provision  against  con- 
solidation was  not  enforced.  These  local  lines  were 
formed  into  large  ones — into  rivals  of  the  six  companies. 
The  processes  of  consolidation  were  finally  blocked. 
The  lines  in  Northern  France  were  in  1876  taken  over 
by  the  Railway  of  the  North,  one  of  the  big  six,  and  a 
very  efficient  one ;  those  of  the  South-west  were,  as  we 
have  seen,  purchased  by  the  state,  in  1877-78. 

The  lines  of  the  state  were  unified,  organised,  and 
put  under  the  administration  of  the  government ;  and 
they  have  remained  to  the  present  the  foundation  of 
the  state  net.  This  net  was,  as  we  have  seen,  only  a 
small  one.  The  entire  mileage  of  France  then 
amounted  to  only  about  13,000,  and  perhaps  as  many 
as  10,000  miles  more  were  needed.  The  big  compan- 
ies were  not  ready  to  undertake  this  extension.  Four 
of  them  were  in  fact  not  particularly  prosperous. 
Under  such  a  condition,  the  ambitions  of  De  Frey- 
cinet,  the  Premier,  had  a  fair  chance  of  realisation. 
He  set  forth  an  elaborate  and  comprehensive  pro- 
gramme of  state  building  and  operation.  He  proposed 
to  complete  and  perfect  the  means  of  transportation, 
and  to  purchase  all  the  existing  lines  for  state  manage- 
ment. This  was  the  first  moment  in  the  history  of 
French  railways  that  complete  nationalisation  was  in 
the  ascendency.     The  government  was  ambitious  for 


s 


70  Railway  Transportation 

the  state  to  perform  many  new  functions,  and  the 
popular  mind  was,  for  the  time  at  least,  not  adverse  to 
it.  An  act  was  passed  by  the  Chambers  in  1879 
providing  for  the  construction  of  5456  miles  (8800  km.) 
of  new  lines.  Since  the  programme  of  the  ministry 
was  based  as  much  upon  political  and  military  motives, 
as  commercial  and  industrial  ones,  the  new  lines  were 
to  be  constructed  in  the  more  remote  and  mountainous 
regions.  A  decade  was  allowed  for  the  building,  at  an 
estimated  cost  of  about  $700,000,000. 

Railway  extension,  under  the  force  of  such  a  pro- 
gramme and  such  a  law,  was  carried  on  during  the 
years  1880-82  with  great  enthusiasm  and  rapidity, 
though  the  politics  of  the  various  sections  wrangled 
over  it.  By  1882  the  government  had,  by  the  pur- 
chase of  old  lines,  especially  secondary  ones,  and  by 
the  construction  of  new  ones,  come  to  control  almost 
10,000  miles — a  mileage  scattered  through  the  lines  of 
the  big  companies,  throughout  the  nation. 

It  was,  of  course,  impossible  to  make  much  of  this 
profitable,  even  in  times  of  average  prosperity.  A 
panic  came,  in  1882,  and  the  financial  situation  of  the 
state  system  became  very  acute.  The  state  had  dur- 
ing the  years  of  the  acquisition  of  this  large  net  been 
forced  to  lease,  for  a  short  period,  small  sections  of  it 
to  the  big  companies,  and  it  now  became  clear  that 
state  operation  of  them  could  not  be  realised  for  a 
good  many  years.  It  was  now  dear  that  at  least 
$1,300,000,000,  instead  of  $700,000,000,  as  first  esti- 
mated, would  be  required  for  the  completion  of  the 
De  Freycinet  programme.  The  state  could  not  afford 
such  a  vast  outlay,  especially  if,  as  now  seemed  evi- 
dent, the  earnings  would  not  for  many  years  cover  the 


A    ^ 


France  71 

expenses  of  operation  and  maintenance.  The  ambi- 
tious programme  meant  too  great  a  burden  upon  the 
French  tax-payers,  and  it  came  to  a  decided  stand- 
still. Its  promoter,  De  Freycinet,  was  driven  out  of 
power  at  the  close  of  1880;  the  treasury  was  already 
burdened,  and  the  operation  by  the  state  "of  the  net 
purchased  in  1877-78  had  increased  rather  than 
decreased  this  load;  Gambetta  died  at  the  beginning 
of  1883,  and  there  was  no  longer  any  capable  advocate 
of  the  nationalisation  of  the  railways.  That  the 
programme  of  1878  should  have  been  abandoned,  in 
spite  of  considerable  popular  expectation  to  the  con- 
trary, is  a  favourable  comment  upon  the  wisdom  of 
the  French  statesmen  who  were  then  in  the  position  of 
chief  executive  power.  A  more  practical  plan  was 
adopted,  and  the  conventions  of  1883  were  made  with 
the  six  big  companies.  It  was  the  government 
leaders,  rather  than  the  companies,  who  were  eager 
for  these  conventions,  for  by  them  the  branch  lines, 
which  had  been  proposed  by  De  Freycinet,  and  which 
were  needed,  for  political  and  military,  if  not  commer- 
cial purposes,  could  be  built. 

The  conventions  provided  for  the  incorporation 
into  the  lines  of  the  great  companies  of  most  of  the 
mileage  purchased  or  built  by  the  state — a  total  mileage 
of  practically  7440  (12,000  km.).  The  state  net  was 
continued,  with  about  the  same  mileage  as  in  1877, 
but  it  now,  by  means  of  exchanges  with  the  companies, 
became  a  more  unified  and  monopolised  one,  located 
in  a  more  definite  section,  in  a  comparatively  small 
territory  in  South-west  France.  The  big  systems  had 
by  these  conventions  a  more  complete  monopoly. 
Since  the  beginning  of  the  building  of  the  branch  lines 


72  Railway  Transportation 

by  small  companies  in  1865,  their  monopoly  had  been 
somewhat  broken.  The  companies  were,  therefore, 
made  stronger;  and  so  was  the  state  net,  though  it  did 
not  acquire  a  through  line  of  its  own  into  Paris — the 
centre  of  all  phases  of  French  life. 

The  conventions  of  1883,  the  result  of  a  long  struggle 
as  to  whether  France  should  have  a  system  of  private 
operation  or  one  of  state  management,  have  with  only 
slight  modifications  remained  in  force  to  this  day. 
The  most  important  change  has  been,  not  in  the 
powers  and  rights  of  the  companies,  but  in  the  absorp- 
tion by  the  state  of  one  of  the  big  systems — the  West- 
em.  The  state  net,  out  of  a  total  length  in  1906  of 
39,772  kilometres,  contained  only  2780;  and  at  the 
beginning  of  1909,  when  a  new  state  net  came  into 
operation,  it  had  but  2990  (1854  miles).  By  the 
purchase  of  the  Western  Company's  lines,  according 
to  a  law  of  July,  1908,  a  new  state  net  of  5965  kilo- 
metres (3728  miles)  was  formed.  This  recent  pur- 
chase has  brought  to  the  state  an  important  system 
with  lines  from  Paris  northward  to  Dieppe,  Havre, 
Cherbourg,  etc.  It  has  also  provided  the  old  state  net 
with  a  government  line  into  Paris.  Since  the  absorp- 
tion of  the  Western,  in  1909,  there  have  been  but  five 
big  systems — the  Northern,  the  Mediterranean  (P.  L. 
M.),  the  Orl^ns,  the  Southern,  and  the  Eastern,  with  a 
total  mileage  of  about  19,218.  These  five  companies 
will  all  by  1950-58  be  absorbed  into  the  state  nets, 
unless  there  should  be  a  change  in  the  conventions  of 
1883.  Their  immovable  property  will  then  go  to  the 
state  without  pay;  its  value  will  by  that  time  be 
completely  amortised.  The  rolling-stock  and  other 
equipment  will    be   paid   for  at   valuation,  by  the 


France  73 

government.  If  at  the  expiration  of  the  conventions 
the  companies  have  not  reimbursed  the  state  for  all 
of  the  advances  made  for  the  construction  of  the 
roadway  and  in  the  guarantees  of  interest  on  their 
bonds,  the  deficit  shall  be  deduced  from  the  purchase 
price  of  the  rolling-stock  and  other  equipment. 

The  state  and  the  companies  were  by  these  conven- 
tions joined  in  the  assumption  of  the  financial  burdens 
of  the  new  lines — those  already  built  or  to  be  built  after 
the  De  Freycinet  programme.  Most  of  the  lines 
already  constructed  would  not  be  profitable  for  many 
years,  and  the  companies  were,  therefore,  to  pay  for 
the  rolling-stock  and  the  other  equipment  only  a  small 
sum.  At  first  this  amount  was  fixed  at  approximately 
$5000  per  kilometre,  later  for  certain  narrow  gage 
lines  at  only  about  $2500.  The  capital  needed  for  the 
completion  of  the  branch  lines  in  the  territory  of  the 
companies  was  to  be  obtained  under  the  government's 
guarantee  of  interest  and  of  final  amortisation.  The 
state  was  also  to  guarantee,  or  make  advances  to 
cover,  certain  dividends  on  the  stock.  The  branch 
lines  needed  within  the  region  of  the  state  net  were, 
of  course,  to  be  constructed  by  the  government.  The 
companies  were  to  receive  the  profits  of  the  operation 
of  the  branch  lines  built  by  themselves,  and,  in  case 
they  advanced  the  necessary  construction  capital, 
they  were  to  be  reimbursed  by  the  government, 
gradually  until  the  expiration  of  seventy-four  years, 
at  which  time,  1958,  the  conventions  would  all  expire. 
In  1883  there  were  in  operation  in  France  about 
17,000  miles  of  railways,  and  the  conventions  called 
for  the  construction  of  700  miles  by  the  state  and  of 
6200  miles  by  the  six  big  companies. 


74  Railway  Transportation 

The  conventions  of  1883  abolished  the  distinctions 
which  had  existed  since  1 859  of  old  lines  and  new  lines. 
The  government  now  agreed  to  guarantee  a  minimiim 
dividend  upon  the  stocks  of  all  the  lines  of  the  six 
companies — their  customary  dividend,  which  was  fairly 
large.  If  the  earnings  of  the  railways  were  perchance 
large  enough  to  create  an  excess  after  paying  this 
minimum  dividend,  the  excess  should  be  divided,  one- 
third  to  the  company,  two- thirds  to  the  government. 
^  The  struggle  between  the  state  and  the  companies 
was  now  at  an  end.  The  conventions  of  1883  formu- 
lated an  effective  plan  of  co-operative  action  between 
the  two  parties.  The  state  was  to  have  its  own  mono- 
poly territory ;  and  so  was  each  company.  There  was , 
in  fact,  to  be  practically  no  competition  between  any 
of  the  railways.  The  traffic  of  France  was  to  be  appor- 
tioned between  the  different  nets,  of  which  the  state 
operated  one.  Perhaps  nowhere  else  in  the  world  has 
the  territory  been  so  completely  parcelled — nowhere 
else  so  complete  a  monopoly  of  railway  transportation. 

The  conventions  of  1883  have  been  highly  favour- 
able to  the  companies.  They  have  meant  fairly 
large  dividends  to  the  stockholders.  Have  these 
large  dividends  come  from  efficiency  and  economy 
of  operation?  Have  they  arisen  from  the  fact 
that  there  has  been  absolutely  no  waste  of  competi- 
tion? Have  they  meant  the  failure  of  the  companies 
to  extend  their  traffic,  in  order  to  build  up  new  indus- 
tries and  commerce?  Connected  with  the  dividends 
of  the  French  railways,  certainly  comes  the  suggestion 
that  the  companies  have  not  constructed  a  sufficient 
mileage  for  the  fullest  development  of  French  indus- 
tries.   Too  much  mileage  is,  as  the  United  States  has  at 


France  75 

times  known,  an  unfortunate  condition ;  it  means  the  e\'il 
of  excessive  speculation  and  abuses.  Too  little  mileage 
means,  on  the  other  hand,  an  undeveloped  people.  The 
conviction  comes  upon  us  that,  when  the  state  made 
a  guarantee  of  a  fairly  large  dividend  to  the  sharehold- 
ers, it  was  really  placing  an  obstacle  to  the  fullest  de- 
velopment of  French  industries  and  commerce. 

Have  these  conventions  been  good  for  the  French 
treasury?  The  answer  has  gradually  through  the 
years  taken  shape,  that  the  government  officials  were 
in  1883  too  hopeful  as  to  the  continued  growth  of 
business  and  consequently  of  the  earnings  of  the  rail- 
ways. There  were,  to  be  sure,  some  reasons  for  such 
hopes.  Though  four  of  the  six  companies  had,  under 
the  contracts  of  guarantee  of  1859,  asked  from  the 
state  treasury  annual  sums  ranging  from  25,000,000 
to  50,000,000  francs  for  the  period  1865-79,  by  1883 
these  calls  had  practically  ceased ;  there  had  for  three 
years  been  a  continuous  increase  in  traffic  and  income 
of  operation.  The  conventions  were,  however,  hardly 
signed,  when  a  period  of  depression  came  upon  the 
commercial  and  industrial  world.  The  force  of  its 
burdens  was  especially  strong  in  France,  since  the 
wine  industry  was  then,  because  of  the  wide-spread 
destruction  of  the  vines  by  the  phylloxera,  largely 
paralysed.  A  great  decrease  in  the  traffic  and  earnings 
of  the  roads  was  the  normal  result,  and  all  the  compan- 
ies, except  the  Northern,  one  after  another,  asked  for 
their  guarantees.  This  condition  continued  more  or 
less  acute  until  1892-93,  since  which  date  most  of  the 
companies  have  been  able  to  pay  something  to  the 
state  by  way  of  reimbursement  for  the  advances  made 
by  it  during  the  period  1883-93.     The  railways  have 


76  Railway  Transportation 

upon  the  whole  been  expensive  to  the  French  Govern- 
ment. With  the  exceptions  of  1881,  1882,  1883,  and 
1905,  the  companies  have  called  upon  the  state  for 
some  of  the  guarantees  of  interest  or  dividends.  The 
total  sum  received  by  the  six  big  companies  from  1863 
to  1905,  for  the  lines  of  general  interest  alone,  reached 
the  figures  of  937,242,483  francs,  and  by  the  secondary 
companies  from  1888  to  1905  as  much  as  93,716,806 — 
a  grand  total  of  1,030,959,289  francs  (about  $206,191,- 
000).  And  until  the  expiration  of  the  conventions,  in 
1950-58,  the-state  guarantees  comparatively  large  div- 
idends on  the  stock,  as  well  as  repays  the  companies 
for  their  total  expenditures  upon  the  construction  of 
new  lines.  At  that  date  all  the  lines  become  the  prop- 
erty of  the  state,  but  until  then  the  government  is  under 
considerable  financial  obligations  to  the  companies. 

The  railways  have,  therefore,  been  a  considerable 
burden  to  the  state,  and  will  continue  for  many  years 
to  be  something  of  a  drain  upon  its  treasury.  Have 
these  burdens  not  been  offset  by  the  services  which 
the  railways  have  rendered  to  the  state  and  the  taxes 
they  have  paid?  The  financial  burdens  of  the  rail- 
ways to  the  state  were  in  1908  approximately  $52,000,- 
000.  The  amount  of  the  taxes  collected  from  the 
railways  was  during  the  same  year  almost  $32,000,000; 
and  the  services  which  the  railways  yearly  render  to 
the  state  in  the  administration  of  the  posts  and  tele- 
graphs, and  in  the  transportation  of  soldiers,  etc.,  are 
estimated  at  possibly  $20,000,000.  When  we  add  to 
these  amounts  the  sums  which  were  in  1908  repaid  by 
the  companies,  we  reach  a  figiire  of  possibly  $62,000,- 
000.  The  returns  of  1908,  while  perhaps  more  than 
the  average  for  any  year  since  1900,  are  not  especially 


France  77 

exceptional.  The  services  of  the  railways  to  the  state 
and  their  taxes  have  for  a  few  years  at  least  been 
equal,  if  not  greater  than,  their  drains  upon  the  public 
treasury. 

The  growth  of  the  railway  mileage  under  the 
operation  of  the  conventions  of  1883  may  best  be  seen 
in  these  figures,  which  are  given  for  typical  years  and 
for  the  lines  of  general  interest  only:  in  1885,  18,600 
miles;  in  1908,  24,800  miles  (40,000  km.).  The  lines 
of  local  interest,  those  which  come  under  the  control 
of  only  one  department,  have  also  grown;  they  have  at 
the  present  a  mileage  of  about  8122  (13,100  km.). 

The  French  lines  have  been  for  the  most  part 
efficiently  built,  and  the  capital  cost  per  mile  of  the 
construction  has  been  much  higher  than  in  the  United 
States,  though  much  lower  than  in  the  United  King- 
dorii.  This  cost  has  not  materially  changed  since  the 
conventions  of  1883  went  into  operation,  as  may  be 
seen  in  these  per  mile  figures  for  representative  dates : 

1884 $128,000 

1894 130,600 

1900 133.800 

1907 137.200 

The  earnings  of  the  railway  capital  in  the  form  of 
both  bonds  and  stocks  have  not  been  very  large.  The 
figures  which  are  here  presented  are,  we  think,  repre- 
sentative ratios  of  the  income  to  capital: 

1845. 5.6% 

1865 4.8% 

1885 3.8% 

1908 4.0% 


78  Railway  Transportation 

The  larger  part  of  this  capital  has  been  supplied  by 
the  bondholders  at  a  rate  of  interest  lower  than  the 
average  of  the  above  figures,  and  consequently  the 
ratios  of  income  to  the  stock  have  been  higher  than 
this  average. 

The  French  lines  have  for  the  larger  part  been 
operated  with  economy,  as  is  suggested  by  the  follow- 
ing typical  coefficients  of  operation:  in  1845,  49%;  in 
1865,  46%;  in  1885,  54%;  in  1908,  58%.  The  big 
lines  especially,  and  the  state  net  to  a  considerable 
degree,  have  been  managed  with  economy  so  far  as 
possible  savings  are  concerned.  They  have  not  made 
the  same  effort  to  increase  the  voltune  of  their  traffic, 
to  secure  new  traffic,  as  they  have  to  make  savings  in 
the  movement  of  the  old. 

Do  the  French  possess  a  mileage  of  railways  suffi- 
cient for  their  fullest  development?  A  fairly  adequate 
answer  may  be  seen  in  the  following  figures  of  mileage 
per  units  of  territory  and  population. 

Upon  the  basis  of  the  mileage  of  lines  per  100  square 
miles  of  area,  the  French  railways  have  had  this 
growth:  in  1876-77,  6.8  miles;  in  1885,  9.8;  in  1898, 
12.7;  in  1907,  14.2.  In  proportion  to  area,  the  French 
mileage  is  considerably  less  than  the  British. 

The  railway  mileage  per  10,000  population  has  been 
at  typical  dates:  in  1876-77,  3.86  miles;  in  1885,  5.39; 
in  1898,  6.7;  in  1907,  7.6 — a  mileage  per  unit  of  popu- 
lation greater  than  that  in  the  United  Kingdom. 

{b)  General  Conditions  of  Traffic 

The  problem  of  traffic,  and  consequently  of  rates, 
is,  as  we  have  seen,  a  fundamentally  vital  one  to  the 


France  79 

railways  as  well  as  to  the  state ;  it  rests  primarily  upon 
the  economic  activity  of  a  people  and  its  natural 
resources.  France  is,  generally  speaking,  not  one  of 
the  leading  industrial  nations.  Upon  the  basis  of 
industries,  she  does  not  rank  so  far  to  the  front  as 
the  United  States,  Great  Britain,  or  Germany.  Her 
agriculture  and  industries  are,  nevertheless,  quite, 
important. 

In  the  manufacture  of  silk,  France  is  a  leader. 
Lyons  is  the  greatest  silk  centre  in  Europe,  and 
St.  Etienne  occupies  the  fourth  place.  The  United 
States,  Germany,  and  Great  Britain  only  excel  her 
in  the  annual  output  of  pig  iron,  which  was  in  1906 
about  3,319,000  tons.  In  the  production  of  coal, 
France  holds  the  fifth  rank,  with  an  annual  output  in 
1906  of  approximately  38,000,000  tons,  as  compared 
with  415,000,000  for  the  United  States. 

The  yield  of  her  farms  and  vineyards  is  also  very 
important.  She  occupied  in  1907  the  third  place  in 
the  production  of  wheat,  with  370,000,000  bushels, 
as  compared  with  Russia's  455,000,000  and  the  United 
States'  634,000,000.  Grapes  and  wines  also  constitute 
a  very  considerable  element  of  her  railway  traffic. 
The  culture  of  wheat  is  distributed  throughout  the 
country.  The  making  of  wine  is  largely  confined  to 
the  Southern  parts,  while  the  chief  centres  of  coal  and 
manufacture  are  in  the  North-eastern  and  South- 
central  portions. 

France,  unlike  the  United  Kingdom  and  Italy,  has 
much  international  traffic.  Most  of  this  moves  by 
steamer  around  Great  Britain  and  Italy.  In  France 
much  of  it  is  carried  overland  by  rail;  some  to  and 
from  Spain ;  some  to  and  from  Switzerland  and  Italy ; 


8o  Railway  Transportation 

some  to  and  from  Austria,  Hungary,  etc.  This  inter- 
national traffic  is  also  highly  competitive.  The  rail- 
ways of  Germany,  Belgium,  Holland,  and  France,  all 
struggle  for  it,  not  to  mention  some  of  the  great  inland 
waterways. 

In  the  matter  of  interior-domestic  traffic,  France  has 
one  characteristic  in  common  with  Italy,  though  not 
with  the  United  Kingdom;  there  is  still  much  of  the 
mediaeval  spirit  of  self-sufficiency  in  many  of  her 
communities.  The  French  are  the  embodiment  of 
thrift  and  saving,  and  in  many  rural  parts  they  are 
largely  self-sufficient  in  their  production  and  con- 
sumption of  commodities.  Such  a  spirit  and  condition 
have,  of  course,  steadily  been  an  obstacle  to  progress 
in  the  making  of  things  on  a  large  scale  and  in  the 
development  of  a  larger  volimie  of  long-distance 
freight  traffic  for  the  railways.  Substantially  the  same 
conditions  exist  in  the  passenger  traffic  of  the  French 
people  themselves.  In  France,  as  in  Italy,  much  of 
the  long-distance  passenger  traffic  is  that  of  foreigners 
— the  tourists,  those  wanderers  who  have  the  attention 
of  many  nations  because  they  spend  money,  if  for  no 
other  reason. 

In  the  interior-commodities  traffic  of  France,  the 
rivers  and  canals  play  a  no  inconsiderable  part;  and 
this  competition  has  an  important  influence  upon  the 
development  of  the  railway  traffic  and  its  rates.  The 
length  of  the  principal  navigable  waterways — ^free 
rivers,  canalised  rivers,  and  canals — is  almost  7500 
miles,  upon  which  and  a  few  minor  ones  the  govern- 
ment has  since  18 14  expended  for  construction, 
improvement,  and  maintenance,  almost  $500,000,000. 
The  state  has  already  expended  this  vast  sum,  and  it 


France  8i 

continues  annually  to  put  into  their  maintenance 
perhaps  as  much  as  $4,000,000,  besides  the  interest  on 
the  sum  already  invested  in  waterways. 

The  French  waterways,  unlike  the  British,  have 
carried  a  considerable  volume  of  traffic.  They  have, 
in  addition  to  being  maintained  in  an  efficient  condi- 
tion, been  protected  by  the  government  from  severe 
competition  on  the  part  of  the  railways.  The  state 
has  usually  fixed  the  rates  of  rail  carriage  at  practically 
20%  higher  than  those  of  the  waterways ;  it  has  main- 
tained these  at  a  great  expense  to  the  public  treasury 
for  the  specific  purpose  of  competition  and  of  relief 
to  the  railways  from  a  superabundant  traffic.  The 
government  has  also  placed  heavy  taxes  upon  the 
railways,  but  none  upon  the  waterways.  The  compara- 
tive growth  of  the  traffic  on  the  waterways  and  the 
railways  may  be  seen  in  these  figures: 

The  waterways,  with  a  mileage  of  6782,  hauled 
18,000,000  tons  (met.). 
1880     The  railways,  with  a  mileage  of  14,315,  hauled 
80,774,000  tons  (met.). 


1905 


The  waterways,  with  a  mileage  of  7483,  hauled 

34,030,000  tons  (met.). 
The  railways,  with  a  mileage  of  24,459,  hauled 

139,000,000  tons  (met.). 


It  is  from  this  table  seen  that  the  waterways 
carried  in  1905  about  20%  of  the  total  traffic,  and  that 
the  average  growth  of  the  tonnage  by  water  has  been 
slightly  more  than  that  by  rail.  The  same  point  is 
established  if  we  consider  the  growth  of  the  kilometric 
tonnage.     During  the  period  1 879-1906  that  of  the 


§2  Railway  Transportation 

railways  (p.  v.)  increased  2,5%  a  year,  while  that  of 
the  waterways,  the  more  circuitous  routes,  3.2%, 

The  waterways  serve,  however,  only  a  small  portion 
of  the  French  people.  The  very  nature  of  the  surface 
of  their  land  makes  it  impossible,  at  least  impracticable, 
for  them  to  operate  in  the  Alpine  or  central  districts, 
or  in  those  of  the  extreme  North-west.  The  great 
bulk  of  the  water  traffic  is  divided  into  two  sections: 
(i)  that  of  the  canals  in  the  North-east,  where  there 
is  much  coal  to  be  moved  into  Germany  and  to  Paris ; 
(2)  that  of  the  Seine,  from  Havre  to  Rouen  and  Paris, 
upon  which  as  much  perhaps  as  one-half  of  the  coal 
consumed  in  Paris  is  hauled,  and  much  of  this  traffic 
comes  by  steamer  direct  from  England  to  Rouen.  The 
traffic  of  these  two  sections,  with  only  about  one-half 
of  the  navigable  waterways,  amounts  to  almost  95% 
of  the  total  water  traffic  of  France. 

The  waterways  transport  only  a  few  commodities. 
Their  traffic  is  confined  almost  wholly  to  those  goods 
which  are  usually  of  slight  or  medium  value,  and  which 
are  not  seriously  damaged  by  the  conditions  and  delays 
of  water  transportation,  as,  for  instance,  coal,  wood, 
stone,  oil,  wine,  iron,  steel,  lumber,  etc. 

The  French  waterways,  though  the  state  has 
expended  a  vast  sum  upon  them,  have,  therefore, 
served  directly  only  a  small  percentage  of  the  people . 
And  their  services  have  not  been,  as  compared  with 
the  American  transportation  charges  for  such  low- 
grade  goods  as  the  waterways  usually  carry,  particu- 
larly cheap;  their  rates  range  from  i  centime  per 
metric  ton  per  kilometre  to  2.5,  or  from  .28  cents  per 
short  ton  per  mile  to  .70  cents. 

For  References,  see  Chapter  VI. 


CHAPTER  VI 

RAILWAY  TRANSPORTATION  IN  FRANCE — {Concluded) 

THE  sources  of  the  passenger  traffic,  in  France  as 
elsewhere,  have  been  in  business,  or  pleasure  and 
culture.  The  density  of  this  traffic  has  upon  the 
French  railways  been  far  less  than  that  of  the  British. 
The  French  are  not  to  the  same  degree  as  the  British, 
especially  the  English,  a  manufacturing  and  a  mining 
people;  they  are  not  so  densely  concentrated  in  great 
industrial  and  commercial  centres;  they  have  never 
had  such  an  industrial  revolution,  that  has  vitally 
changed  the  ratios  of  rural  and  urban  population,  as 
have  the  English.  The  passenger  traffic  of  the  French 
railways  has,  nevertheless,  had  a  steady  growth;  and 
it  has  come  to  be  comparatively  dense,  though  still 
much  less  so  than  that  of  the  British,  which  in  1900 
was  27  as  compared  with  10  for  the  French.  The 
steady  development  of  this  traffic  may  be  seen  in  the 
per  capita  trips  of  representative  years:  i  in  1855; 
4.8  in  1881 ;  10  in  1896  and  1900.  This  was  a  ten-fold 
increase  in  forty-one  years. 

While  the  per  capita  use  of  the  railways  has  had  a 
steady  growth,  the  average  length  of  the  trip  has, 
practically,  throughout  the  whole  period  1 855-1 905 
decreased,  as  may  be  seen  in  the  following  figures 
at  typical  dates:   55.3  kilometres  (34  miles)  in  1855; 

83 


84  Railway  Transportation 

32.9   in    1890;   28.9   in    1900;   30.3    (18.7  miles)   in 
1905. 

(a)  Passenger  Service  and  Rates 

The  passenger  traffic  in  France,  as  in  the  United 
Kingdom,  has  been  for  the  most  part  divided  into 
three  distinct  classes  of  service;  and  the  charge  for  each 
class  has  differed  considerably  from  that  of  another. 
Such  a  classification  has  been  easily  made,  since  in 
tastes  and  economy  the  French  people  have  naturally 
grouped  themselves  into  distinct  divisions.  In  France, 
as  in  Great  Britain,  the  most  notable  movement  in 
the  history  of  the  passenger  service  has  been  that  from 
the  first  class  toward  the  third.  During  the  period 
1853-83  the  first-class  traffic  decreased  from  11%  of 
the  total  to  8%,  the  second  from  41%  to  33%,  while 
the  third  increased  from  48%  to  59%.  The  divisions 
of  traffic  were  in  1905:  4.4%  in  the  first  class,  24.7% 
in  the  second,  70.9%  in  the  third;  and  these  percen- 
tages have  not  varied  greatly  for  a  good  many  years. 

The  rates  of  the  passenger  service  upon  the  French 
railways  have  been  practically  all  proportional  to  the 
distance,  upon  a  kilometric  basis.  The  system  of  a 
tapering  rate,  of  a  reduction  in  the  charge  per  mile  as 
the  length  of  the  journey  becomes  greater,  has  not 
come  into  use  in  France.  The  demand  for  such  a 
system  of  rate  making  has  not  been  strong,  since  the 
average  length  of  the  journey  has  been,  as  we  have 
said,  very  short.  These  rates  have  all  the  time,  more 
especially  since  1846,  been  under  the  far-reaching 
control  of  the  state.  There  have  been  statutory 
maxima  prescribed  in  the  conventions,  rather  in  the 


France  85 

cahier  des  charges  which  have  always  been  at- 
tached to  the  conventions  or  concessions.  In  1859 
these  cahier  des  charges  were  made  most  exhaus- 
tive as  to  the  rights  of  the  railway  companies  to  make 
charges;  and,  while  new  conventions  were  in  1883 
formulated  and  signed  by  the  six  companies  and  the 
state,  the  cahier  des  charges  of  1859  have  remained  in 
force  to  this  day.  The  maximum  rates  prescribed  in 
these  documents  for  the  three  classes  of  the  passenger 
service,  and  which  have  been  the  standard  of  charges 
beyond  which  the  companies  could  not  legally  go, 
were:  10  centimes  per  passenger  per  kilometre  (3.1 
cents  per  mile)  for  the  first,  7.5  for  the  second,  5.5 
(1.7  cents  per  mile)  for  the  third. 

Such  have  been  the  legal  maxima.  What  have 
been  the  actual  rates?  We  are  unable  to  ascertain 
just  what  these  have  at  times  been.  During  the 
period  1879-84  the  actual  normal  rates  were:  11.2 
centimes  per  passenger  per  kilometre  for  the  first,  8.4 
for  the  second,  6.16  for  the  third.  These  rates  included 
a  state  tax  of  23.2%,  levied  according  to  a  law  of  1871 . 
They  were  slightly  lower  than  those  in  force  at  an 
earlier  date.  The  tax  upon  tickets  was  in  1892 
reduced  to  12%.  The  actual  normal  rates  were  now 
made  uniform  for  all  the  lines  and  again  slightly 
reformed.  The  second  class  was  reduced  10%,  to 
7.56  centimes  per  passenger  per  kilometre;  the  third, 
20%,  to  4.92.  And  these  were  the  rates  in  force  in 
1900,  and  again  in  1909:  11.2  centimes  per  kilometre 
(3.48  cents  per  mile)  for  Class  I,  7.56  for  Class  II, 
4.92  (1.53  cents  per  mile)  for  Class  III,  all  including 
the  tax.  An  allowance  for  free  transportation  of 
baggage  up  to  66  pounds  has  been  made. 


86  Railway  Transportation 

The  actual  rates  as  given  above  have  been  the 
standard  ones.  There  have,  however,  been  numerous 
special  tickets — season,  return,  etc. — ;  and  the  average 
rate  for  all  the  classes  has  been  less  than  that  of  the 
standard  for  the  third.  The  decline  in  this  average 
charge  has  been  important,  as  may  be  seen  in  these 
figures  taken  from  comparatively  representative  years : 

1855 5.91  centimes  per  kilometre  (1.85  cents  per  mile.) 

1865 5.53 


18/5 524 

1885 4.66 

1895 3.85 

1905 3-69 

1908 3.56 


(1.45  cents  per  mile.) 


(l.io  cents  per  mile.) 


The  French  rates  are,  therefore,  considerably  less 
than  the  British,  but  the  service,  especially  in  speed, 
is,  we  think,  not  so  efficient. 

(b)  Freight  Service  and  Rates 

The  commodities  traffic  of  the  French  railways  is, 
as  upon  practically  all  the  railways  of  the  world,  more 
important  than  the  passenger.  In  1900,  and  this 
may  be  taken  as  a  fairly  representative  year,  the 
passenger  service  yielded  44.7%  of  all  the  income, 
while  the  freight  service's  portion  was  53.6%,  with 
1.7%  from  miscellaneous  sources. 

The  freight  service  has  been  more  important  than 
the  passenger  from  still  another  point  of  view — its 
complexity.  Its  classification  has  been  a  most  diffi- 
cult task.  The  variety  of  commodities  has  been  great. 
The  state  has  in  France  practically  from  the  beginning 
exercised  a  powerful  inlSuence  over  both  classification 


France  87 

and  rates.  The  concessions  made  in  1842  provided 
for  a  classification  into  four  groups  of  traffic,  and  for 
each  class  they  prescribed  statutory  maximum  rates. 
For  a  time  the  companies  collected  rates  practically 
equal  to  these  maxima,  but  competition,  rail  and 
water,  soon  brought  a  reduction  in  the  actual  charges. 
The  French  actual  rates  have,  however,  never  been  as 
much  below  the  maxima  as  the  British  or  American. 
Some  discriminations  occurred,  as  they  always  do  un- 
der competition,  and  these  led  to  a  greater  and  more 
far-reaching  regulation  by  the  government — the  sys- 
tem of  the  cahier  des  charges  of  1857-59.  The  whole 
programme  of  the  state's  control  over  rates  was  now 
elaborately  formed,  and  uniform  standard  maximum 
rates  were  prescribed  for  all  the  big  companies. 

These  maxima  have,  as  we  have  said,  remained  un- 
changed to  the  present.  The  companies  have  in  their 
actual  rates  made  variations  from  these  maxima ;  for 
practically  all  forms  of  traffic  except  carriages  and 
animals  they  have  usually  offered  rates  lower  than 
the  maxima.  The  maxima  have  been  imiform  for 
all  the  companies,  and  the  fact  that  no  other  rates 
than  the  maxima  may  be  made  by  the  companies  with- 
out the  approval  of  the  Minister  of  Public  Works,  who 
for  the  sake  of  justice  to  the  shippers  and  of  finance 
to  the  government  supervises  them,  has  meant  a  com- 
paratively rigid  system  of  actual  rates  upon  a  kilo- 
metric  basis.  The  minister  has  allowed  nimierous 
variations  from  the  fixed  standards,  for  the  purpose  of 
fostering  certain  local  industries  or  the  shipment  of 
commodities  into  or  away  from  France.  Lower  rates 
have,  for  instance,  been  allowed  upon  the  export 
traffic,  in  order  to  promote  the  interests  of  French 


88  Railway  Transportation 

ports  as  against  foreign  rival  ports.  At  times  reduc- 
tions in  the  standard  rates  have  also  been  allowed  upon 
the  import  traffic,  to  make  it  possible  for  the  French 
ports  to  maintain  their  lead  in  their  competition  with 
their  rivals.  All  these  variations  may,  however,  exist 
only  by  the  permission  of  the  minister,  and  usually 
only  after  an  elaborate  investigation. 

The  French  classifications  and  schedules  of  rates 
have  upon  the  whole  been  most  complicated,  perhaps 
more  complicated  than  those  of  any  other  country. 
The  rates  have  been  based  upon  what  the  traffic  would 
bear — upon  the  value  of  service ;  and  this  is  everywhere 
a  fairly  complicated  principle  of  rate  making.  There 
were  in  1879,  when  a  reform,  for  the  purpose  of  secur- 
ing greater  simplicity  and  some  reduction  in  rates,  was 
inaugurated,  as  many  as  1854  special  tariffs.  The 
government  now  established  six  classes  of  freight 
traffic  for  the  slow  (petite  vitesse)  service,  uni- 
formly applicable  to  all  of  the  companies ;  and  formu- 
lated standard  rates  for  each  class,  with  variations 
according  to  the  nature  of  the  goods,  their  bulk,  and 
the  distance  of  their  haul.  For  the  fast  (grande 
vitesse)  service,  the  standard  rates  were  now  made 
uniform,  though  its  traffic  remained  unclassified. 
Further  uniformity  and  simplification  were  made  in 
1892  and  1895. 

The  actual  classifications,  and  especially  the  actual 
rates,  did  not,  however,  by  these  reform  acts  become 
entirely  uniform.  The  rates  had  little  by  little  been 
formulated  by  each  system,  without  any  special  care 
for  uniformity  with  those  of  another  company.  The 
general  maxima  as  prescribed  in  the  cahier  des 
charges  had,  as  we  have  stated,  no  great^  influence 


France  89 

over  the  actual  rates  for  many  of  the  commodities. 
The  classifications  and  schedules  of  rates  have,  there- 
fore, in  reality  continued,  to  the  present,  complicated. 
So  great  is  their  complexity,  that  the  shipper  must  be 
an  expert  in  the  intricacies  of  railway  transportation 
or  ship  his  goods  through  forwarding  agencies — a 
thing  which  most  of  the  small  shippers  regularly  do. 
A  further  comment  upon  the  complexity  of  the  actual 
classifications  and  rates  is  found  in  the  fact  that  the 
book  of  schedules  for  the  fast  service  contains  986 
pages,  while  that  of  the  slow  traffic  has  1726. 

To  give  a  complete  history  of  the  actual  rates  would 
require  too  much  space,  even  if  we  could  ascertain  it ; 
and  we  shall  here  give  only  the  chief  facts  as  to  these 
rates  at  certain  representative  periods. 

The  rates,  including  taxes,  for  all  merchandise  hauled 
at  the  fast  speed  were  in  1884,  upon  the  lines  of  one  of 
the  efficient  companies,  the  Eastern,  as  follows: 

Up  to  200  km.,  40  centimes  per  ton  (met.)  per  km. 

From  200  to  300  km.,  38        "  "     "       "        "     " 

From  300  to  400  km.,  35.8     "  "     "       "        "     " 

Over  400  km.,  33.6     "  "     "       "        "     " 

The  fast  service  rates  have  since  1884,  especially 
since  the  revision  of  1892,  had  a  decrease,  though  not 
an  important  one,  as  may  be  seen  in  these  figures  of 
1903  and  1908  for  all  the  systems: 

(a)  For  shipments  of  merchandise  not  exceeding  40  kg.  (88  lbs.) 

Up  to  200  km.  (124  miles),  35  centimes  per  ton  (met.)  per  km. 
From  200  to  300  km.,  32  centimes  per  ton  (met.)  per  km. 

From  800  to  1000  km.  (496  to  620  miles),  28  centimes  per  ton 
(met.)  per  km. 
Over  1000  km.,  25  centimes  per  ton  (met.)  per  km. 


90 


Railway  Transportation 


(b)  For  shipments  of  more  than  40  kg. 


Up  to  100  km. 
100-300        " 
300-500 
500-600        " 

lOOO-IIOO     " 

Over  1 100    " 


Food  Products. 


24 

22.5 

21 

195 

12 

10.5 


These  rates  are  based  upon  the  kilometre,  but  taper 
with  the  length  of  the  haul  up  to  a  certain  limit.  This 
system  of  the  tapering  rate  or  bareme,  as  it  is  called 
in  France,  has  almost  universal  application  in  the 
freight  service  of  the  French  lines.  Each  bartme  is 
supposed  to  be  sufficiently  diverse  to  render  service 
to  the  different  needs.  The  decrease  in  the  rates  for 
food  products  has,  however,  not  been  sufficient  to 
enable  many  of  them  to  move  a  long  distance.  The 
milk  supply  of  Paris,  for  instance,  comes  almost  wholly 
from  within  a  radius  of  about  seventy-five  miles,  as 
compared  with  300  miles  or  more  for  New  York,  and 
is  consequently  expensive. 

The  legal  maximum  charge  for  the  fast  service  has 
been  36  centimes  per  ton  per  kilometre;  and  prior  to 
1892,  when  a  general  revision  of  classifications  and 
rates  was  made,  a  state  tax  of  23.2%  was  levied 
upon  this  service  and  was  consequently  allowed 
to  be  shifted  to  the  shipper.  It  is,  therefore, 
seen  that  the  actual  rates  have  been  lower  than 
the  maxima. 

What  have  been  the  actual  rates  for  the  slow 
freight   service?    From    1872    to    1881    these   rates 


France 


91 


changed  only  slightly,  toward  an  increase,  with  an 
average  of  perhaps  i  .63  cents  per  short  ton  per  mile ; 
this  average  had  by  1885  become  practically  1.65. 
The  class  rates  of  this  period  may  be  seen  in  the 
following  figures  taken,  in  1885,  from  one  of  the 
representative  companies,  the  P.  L.  M.,  and  for  two 
of  its  six  classes  of  traflSc: 


Class  I 

Class  V 

Up  to  25  km. 

16  centimes  per  ton  (met.)  per  km. 

8 

From     26-  100  km. 

16          

8 

'*         lOI-    ISO     " 

J  J          ..          ..     .. 

8 

"        isi-  200    " 

IS                               ' 

7 

"        201-  300    " 

^s      !       !           " 

4 

"       301-  soo    " 

14       • 

4 

"        SOI-  600    " 

13 

4 

"        601-  700    " 

12 

4 

"        701-  800    " 

II       "       "   **      "      • 

4 

"        801-  900    " 

10       "       "   "      "      ' 

4 

"        901-1000    '* 

9       "       * ' 

' 

4 

"        lOOI-IIOO     " 

8           

4 

In  1885  perhaps  as  much  as  80%  of  all  the  slow 
freight  moved  at  commodity  or  exceptional  charges, 
not  at  the  above  normal  class  rates.  The  commodity 
rates  were  lower  than  the  normal ;  they  were  for  large 
shipments,  while  the  class  rates  were  for  small  piece 
lots.  The  exceptional  rates  for  piece  shipments  were 
because  of  extraordinary  conditions.  There  were, 
however,  no  discriminations  in  rates.  All  varia- 
tions from  the  standards  must  be  approved  by  the 
Minister  of  PubHc  Works,  and  he  performed  his  tasks 
effectively. 

In  1892  and  again  in  1895  there  were  changes  in  the 
schedules  of  rates  and  classes,  with  the  view  of  greater 
uniformity  between  the  companies.     At  these  dates, 


92  Railway  Transportation 

as  at  earlier  ones,  uniformity  in  the  actual  rates  and 
classes  was,  however,  far  from  complete.  There  were 
then,  and  have  been  to  this  day,  many  commodity 
rates  for  carload  lots,  lower  than  the  normal  class 
rates.  There  were  then,  and  have  continued  to  be, 
important  variations  in  the  rates  for  small  piece  ship- 
ments. The  French  have  been  exceptionally  efficient 
makers  of  high  value  articles,  as,  for  instance,  fine 
laces  and  textiles,  and  these  cannot  be  effectively 
shipped  in  carload  (5  or  10  ton)  lots.  The  government 
has,  therefore,  from  the  beginning,  granted  permission 
for  exceptionally  low  piece  rates  upon  such  traffic 
whenever  it  is  carried  for  export.  The  French  rail- 
ways have  also  taken  some  part  in  the  international 
traffic  of  Western  Europe,  and  in  this  they  must  com- 
pete with  the  railways  of  Germany,  Holland,  and 
Belgium,  as  well  as  the  great  waterways.  Such  a 
traffic  situation  has  demanded  special  consideration, 
and  has  resulted  in  the  concession  of  exceptionally 
low  piece  and  carload  rates.  Variations  from  the 
normal  charges  have,  therefore,  been  numerous,  and 
they  have  lacked  uniformity  among  the  companies. 
In  1 910  they  were,  however,  all  codified  into  one 
book,  which  was  to  be  common  for  all  the  great 
systems. 

What  changes  have  been  made  in  the  actual  class 
rates  since  1885?  The  maxima  of  the  cahier 
des  charges  have,  as  we  have  seen,  remained  un- 
changed. Have  the  actual  class  rates  remained 
the  same?  The  following  table  of  the  general  tariff 
as  charged  in  1908-09  by  the  P.  L.  M.,  which  was 
still  representative  of  the  big  companies,  clearly 
answers: 


France 


93 


Class  I 

II 

III 

IV 

V 

VI 

Upto2S    km. 

16  centimes  per  ton  (met.)  pet  km. 

14 

13 

10 

8 

8 

26-     30      " 

16       

14 

13 

10 

8 

4 

31-     SO      " 

16       

14 

13 

10 

8 

4 

SI-  100 

(62  miles) 

16       

14 

13 

10 

8 

4 

101-    ISO     " 

IS      

13 

II 

9 

8 

35 

ISI-  200    " 

IS      

13 

11 

9 

7 

3.5 

201-  300    " 

IS      

13 

II 

9 

4 

3-S 

301-  400    " 

14       

12 

10 

8 

4 

3 

401-  soo    " 

14       ' 

13 

10 

8 

4 

3 

SOI-  600    " 

13        

II 

9 

7 

4 

3 

601-  700    *• 

12        "           "     "        "        "     " 

10 

8 

6 

4 

2-5 

701-  800    " 

II        "           

9 

7 

5 

4 

3.5 

801-  900    " 

10       "           '     " 

8 

6 

4 

4 

2.5 

901-1000    " 

9        

7 

5 

4 

4 

2 

lOOI-lIOO     " 

(683  miles) 

8       

6 

5 

4 

4 

3 

These  rates  of  1909  were  exactly  the  same,  for 
Classes  I  and  V,  as  those  in  1885.  And  these  rates  of 
the  P.  L.  M.  are,  with  the  slightest  variation,  the 
present  rates  of  the  other  large  systems.  They  all 
have  as  their  initial  rates  16,  14,  12,  10,  8,  and  8 
centimes  per  ton  (met.)  per  kilometre;  the  first  four 
classes  have  a  decrease  of  rate  at  loi  km. ;  the  fifth,  at 
151 ;  the  sixth,  at  26.  They  all  have  for  distances  of 
looi-iioo  kilometres  rates  as  follows:  8,  6,  5,  4,  4, 
and  2  centimes. 

The  decline  in  the  actual  rates  as  indicated  by  the 
changes  in  the  nonnal  class  charges  is,  therefore,  very 
slight,  nothing  since  1885.  When,  however,  all  the 
rates  for  "class,"  "commodity,"  and  "exceptional" 
shipments  have  been  averaged,  we  find  that  there 
has  been  an  important  decrease,  as  is  shown  by 
these  average  charges  for  typical  years:  11. 12  cen- 
times per  ton  (met.)  per  kilometre  in  1845;  7.65  in 
1855;  6.08  in  1865;  6.06  in  1875;  5.94  in  1885; 
5.16  in   1895   (1.45  cents  per  short  ton  per  mile); 


94  Railway  Transportation 

4.52  in  1905;  4.29  in  1908  (1.21  cents  per  short  ton 
per  mile). 

While  the  decline  in  the  French  rates  has  been  very 
important,  they  are  still  relatively  high,  especially 
high  as  compared  with  those  in  the  United  States. 
The  length  of  the  haul  is  always  a  significant  fact. 
This  has  upon  an  average  been  short  in  France.  In 
i860  it  was  134  kilometres  (83  miles);  in  1880,  128; 
in  1905,  127  (78  miles).  There  has  been  practically 
no  long  distance  haul  of  grain,  and  little  of  coal  and 
wine.  Though  French  coal  is  needed  in  the  northern 
lowlands  to  compete  with  the  English,  and  though 
considerable  quantities  of  southern  wine  could  be 
profitably  sold  in  Northern  France,  the  railway  rates 
for  such  distances  have  been  too  high  for  their  transr 
portation.  Length  of  the  haul  influences  rates,  but 
the  rates  in  turn  profoundly  affect  the  length  of  haul. 
The  principle  of  a  kilometre  basis  has  had  great 
weight  in  the  French  rate  making.  There  have,  to  be 
sure,  been  fairly  important  variations  from  this  basis, 
but  still  they  have  not  been  sufficiently  great  to 
stimulate  a  large  volume  of  long  distance  goods  traffic. 
These  variations,  whether  in  the  "commodity"  rates 
or  the  "exceptional,"  have,  moreover,  been  secured 
after  a  long  and  cumbersome  investigation.  The 
railways  have,  because  of  the  rigid  and  inelastic 
control  of  the  state,  been  slow  to  make  experiments 
with  rates  in  order  to  develop  new  business;  and 
too  the  fact  of  their  guarantee  of  dividends  from 
the  state  treasury  has,  we  think,  been  a  retarding 
force.  For  these  and  other  reasons,  the  French 
freight  service  has  not  been  as  efficient  as  it  might 
have  been. 


France  95 

(c)  Ideals  and  Machinery  of  State  Control — 
Management 

State  control  of  private  operation  has  been  in 
France  remarkably  efficient,  though  very  inelastic. 
The  whole  scheme  of  railways  was  at  the  beginning 
laid  out  by  government  engineers;  and  trained 
engineers  and  inspectors  have  through  all  the  years 
watched  their  development  and  management.  The 
companies  have  held  in  their  right  of  possession  only 
part  of  the  roadway,  and  this  only  for  a  limited  period. 
Their  rights,  powers,  and  privileges  have  all  been  most 
elaborately  and  minutely  set  forth  in  the  conventions, 
or  the  cahier  des  charges  which  have  been  attached 
to  them.  That  these  conventions  might  reserve  to 
the  government  every  possible  right  of  control  over 
the  companies,  there  has  been  the  requirement  that 
all  concessions  which  have  been  made  by  the  minister 
to  lines  of  more  than  twenty  kilometres  should  be 
approved  by  a  law  before  construction  could  begin. 
The  state  control  of  private  lines  in  France  has  been 
all-comprehensive.  It  has  covered  all  important 
matters  of  finance  and  of  operation,  whether  technical 
or  commercial;  the  cahier  des  charges  of  1857  and 
1859,  which  have  come  down  to  the  present  with- 
out change,  are  most  remarkable  documents  for  their 
scope  and  completeness.  State  control  of  private  lines 
in  France  has  been  as  great  as  state  control  of  public 
lines  in  Germany.  It  has  been  more  rigidly  uniform; 
the  state  may  upon  its  own  lines  allow  more  varia- 
tions, upon  private  lines,  fewer. 

The  Minister  of  Public  Works  has  been  the  all- 
powerful  factor  in  the  machinery  of  this  control.  He 


96  Railway  Transportation 

has  been  absolute  in  all  matters  of  public  safety ;  over 
the  industrial  and  commercial  phases  his  power  has 
been  slightly  limited.  He  has  never  been  able  to 
dictate  the  charges.  He  could  only  place  a  veto  upon 
those  proposed  by  the  railways.  The  power  of  making 
rates  in  the  first  instance  was,  in  the  conventions  of 
1859  and  1883,  specifically  granted  to  the  companies. 
This  power  was,  however,  restricted  by  two  provisions : 
(i)  that  they  should  never  be  larger  than  the  statutory 
maxima  of  the  cahier  des  charges;  (2)  that  they  must 
always  be  approved  by  the  Minister  of  Public  Works. 
The  machinery  of  state  control  through  an  adminis- 
trative body  dates  back  as  far  as  1842.  In  this  year 
the  foundations  were  laid  by  a  law,  the  provisions  of 
which  were  so  important  that  they  have  come  down  to 
the  present  with  only  slight  modifications.  An  Act  of 
1845  and  an  Ordinance  of  1846  more  completely  defined 
the  powers  and  duties  of  this  body.  So  comprehensive 
was  the  Ordinance  of  1846  that  it  was  fully  reproduced 
in  an  important  decree  of  1 901 .  The  chief  officer  in  this 
body  has  been  the  Minister  of  Public  Works.  He  was 
by  the  early  laws  authorised  to  exercise  direct  control 
over  all  phases  of  the  railways  of  general  interest, 
whether  private  or  state.  Since  an  increase  in  the 
rates  was  a  matter  of  interest  to  the  public,  and  a 
decrease,  a  vital  point  to  the  treasury,  which  must 
bear  the  burdens  of  the  state's  guarantee  of  interest 
on  the  bonds  or  of  dividends  on  the  stock  of  the 
companies,  the  minister  was  given  the  power  of  con- 
firmation of  all  changes  in  them.  The  powers  which 
were  given  him  in  the  early  laws  were  more  clearly 
defined  in  the  cahier  des  charges  of  1857  and  1859  and 
in  ordinances  covering  the  period  of  1 846-1 901. 


France  97 

Seven  departments,  which  have  been  attached  to 
the  Ministry  of  Public  Works,  have  performed  the 
tasks  of  actual  general  control — one  department  for 
each  of  the  big  systems,  including  that  of  the  state. 
These  departments,  which  are  of  recent  formation, 
being  organised  according  to  a  presidential  decree  of 
1895,  have  devoted  their  energies  largely,  exclusively 
since  1901,  to  technical  matters.  A  Director  of 
Control  was  appointed  as  the  chief  officer  of  each  de- 
partment— of  each  system  of  lines.  He  or  a  represen- 
tative of  his  has  taken  part  in  the  general  meetings  of 
the  company,  over  which  he  has  the  supervisory 
powers ;  he  has  also  been  present  at  the  sessions  of  any 
commissions  or  committees  which  have  by  the  minis- 
ter been  appointed  to  investigate  the  conditions  of  the 
company's  lines  and  their  operation. 

Prior  to  1901  the  supervision  of  the  commercial 
phases  was  in  the  hands  of  the  Director  of  Control. 
There  was  made  at  that  date  a  separation  into  two 
departments:  (i)  technical  control,  (2)  commercial 
control.  The  newly  created  department  of  commer- 
cial control  was  to  devote  all  of  its  energies  to  an 
examination  of  the  economic  phases  of  each  system  of 
lines,  to  study  the  rates  and  their  influence  upon 
traffic.  A  Director  of  Commercial  Control  was  made 
the  chief  administrator  in  this  department,  and  his 
tasks  were  confined  exclusively  to  the  commercial 
aspects  of  railway  transportation;  all  other  phases 
were  left  to  the  Director  of  Control. 

There  has  also  been  attached  to  the  Ministry  of 
Public  Works  a  department  of  financial  control — an 
Inspection  des  Finances.  The  vital  relationship  ex- 
isting between  the  companies  and  the  state  demands 

7 


98  Railway  Transportation 

that  all  points  of  finance  should  be  closely  supervised 
by  the  minister.  The  state  must  make  good  its 
guarantee  of  interest  and  dividends;  it  might  partici- 
pate in  the  profits.  This  department  has  inspected 
the  books  of  each  company.  Before  the  company 
can  issue  additional  stocks  or  bonds,  the  minister 
must  approve  the  proposition  as  a  whole;  and  the 
department  of  technical  control  must  approve  any 
expenditure  for  the  construction  or  improvement 
of  lines. 

These  three  departments  of  technical,  commercial, 
and  financial  control,  though  they  have  been  the  most 
important  elements  in  the  machinery  of  the  state's 
supervision,  have  not  been  the  only  ones.  There  have 
been  attached  to  the  Ministry  of  Public  Works  or 
to  these  departments  advisory  councils.  These  have 
been:  (i)  the  General  Council  of  Bridges  and  Roads, 

(2)  the  Commission  of  Audit  for  Railway  Accounts, 

(3)  the  Technical  Advisory  Council,  and  (4)  the 
Commercial  Advisory  Council. 

The  first  council  has  investigated  the  proposed 
extensions  of  Hnes,  and  advised  the  minister  upon 
them.  The  auditing  commission  has  determined  the 
amount  of  the  guarantee  to  be  paid  to  the  companies, 
as  well  as  the  amount  which  should  accrue  to  the  state 
treasury  from  the  profits  of  operation.  The  Technical 
Advisory  Council,  which  has  been  composed  of 
engineers  and  representatives  of  the  ministers  of 
public  works,  war,  posts,  and  telegraphs,  is  a  com- 
paratively new  body.  It  was  first  organised  in 
1900  and  1903,  and  it  was  slightly  reorganised  in 
1906. 

The  most  important  of  these  advisory  councils  is  per- 


France  99 

haps  that  of  commercial  control,  which  was  organised 
in  1878  and  reformed  in  1898  and  1907.  It  has  taken 
under  consideration  all  matters  of  the  improvement 
of  the  service,  in  order  to  increase  the  traffic.  Its  most 
significant  work  has,  however,  been  in  the  considera- 
tion of  the  rates  which  the  railways  have  submitted 
to  the  Minister  of  Public  Works  for  confirmation. 
Cases  of  emergency  export  rates  may  be  confirmed  by 
the  minister  himself,  and  are  consequently  disposed  of 
quickly.  But  in  all  other  rates  the  problem  of  con- 
firmation has  been  a  difficult  and  long-delayed  one. 
These  must  be  thoroughly  investigated,  and  the 
advisory  council  of  commercial  control  must  pass 
judgment  upon  them.  This  council  must  also  be 
consulted  as  to  the  interpretation  of  the  laws  and 
ordinances,  and  of  the  clauses  of  the  cahier  des 
charges,  which  deal  with  commercial  operation. 

In  the  composition  of  the  Commercial  Advisory 
Council,  two  elements  are  well  represented:  (i)  that  of 
the  administration  of  the  government,  (2)  that  of  the 
commercial  and  industrial  interests  and  the  general 
public.  Agriculture,  industry,  and  commerce,  as  well 
as  the  legislature,  all  have  their  representatives  in  this 
body.  Its  membership  has,  therefore,  become  very 
large;  and,  to  facilitate  its  work,  a  committee  of  sixty- 
eight  members  has  been  appointed  to  perform  its 
more  regular  duties.  This  council  has,  from  its  be- 
ginning in  1878,  been  of  tremendous  influence  upon 
classifications  and  rates.  It  has  been  the  real  body 
that  has  controlled  them.  Its  most  important  work 
has,  however,  been  not  to  make  rates,  but  to  prevent 
discriminations  in  them — to  maintain  the  maximum 
justice   in   the   administration   of   the   rates  which 


100  Railway  Transportation 

are  initiated  by  the  companies  tinder  the  statutory 
maxima. 

The  management  of  the  state  net  has,  like  the  con- 
trol of  the  private  companies,  been  in  the  hands  of  the 
Minister  of  Public  Works.  Its  actual  operation  has, 
however,  been  managed  by  a  Director  of  Operation. 
He,  just  as  the  directors  of  control  of  the  private  lines, 
has  been  assisted  by  other  bodies.  In  all  matters  of 
finance,  the  two  houses  of  the  legislature  have  been 
the  controlling  factors;  the  Chambers  have  voted 
yearly  upon  all  points  in  the  state  railway  budget, 
whether  for  operation  or  maintenance. 

The  ideal  of  state  control  has  been  to  secure  a  slow 
but  certain  development  of  the  lines,  and  to  secure  the 
maximum  of  justice  to  all  parties  in  their  operation. 
The  power  of  this  control  has  all  the  time  been  strong 
and  effective.  It  has,  however,  been  too  much 
inclined  to  act  with  rigid  uniformity.  The  British 
control  has  worked  for  practical  expediency,  with  as 
much  justice  as  possible  under  the  actual  conditions. 
The  French  has,  on  the  other  hand,  striven  for  maxi- 
mum justice,  with  slighter  care  for  practical  ex- 
pediency. The  British  railway  history  has  for  the 
most  part  been  one  of  the  minimum  interference  on 
the  part  of  the  state;  the  French,  one  of  the 
maximtmi. 

References  on  the  French  Railways 
(See  note  to  References  to  Chapter  I.) 

C.  Colson:  Transports  et  Tarifs,  1908,  Paris. 
C.  Colson:  Transports  et  Tarifs,  Supplement,  1910,  Paris. 
C.  Colson:  Cours  D'Economie  Politique  (Livre  Sixi^me),  1907, 
Paris. 


France  loi 

C.  Colson:  AbrSgi  de  la  Legislation  des  Chemins  de  Fer,  1903, 
Paris. 

A.  Picard:  Les  Chemins  de  Fer  fransais,  6  vols.,  1884-85, 
Paris. 

R.  von  Kaufmann:  Die  Eisenbahnpolitik  Frankreichs,  2  vols., 
1896,  Stuttgart. 

Siatistique  des  Chemins  de  Fer  frangais. 

Revue  Generate  des  Chemins  de  Fer  el  des  Tramways,  Paris. 

Archiv  fur  Eisenbahnwesen,  Berlin. 

Board  of  Trade  Reports,  1910,  London. 

H.  Lambert:  Reseau  de  VEst,  1907,  Paris. 

F.  Ulrich :  Das  Eisenbahntarifwesen  im AUgemeinen,  1 886,  Berlin. 

W.  E.  Weyl:  The  Passenger  Traffic  oj  Railways,  1901,  Phila- 
delphia. 


CHAPTER  VII 

RAILWAY  TRANSPORTATION  IN  ITALY 

NO  other  country  has,  perhaps,  had  quite  the 
variety  of  railway  experience  as  Italy.  The 
Italian  railways  for  this,  if  for  no  other,  reason  deserve 
very  careful  consideration.  Railway  management  in 
Italy  has,  moreover,  had  the  most  exhaustive  investi- 
gations. The  Italian  reports  have  been  marvels  of 
comprehensiveness. 

When  the  first  railway  came  to  Italy,  she  was  but 
a  "mere  geographical  expression";  and  in  Italy,  as 
elsewhere,  it  came  to  mould  and  change  the  conditions 
and  problems  of  life.  She  was  then  but  a  collection 
of  independent  states,  with  much  of  the  form  and 
spirit  of  mediaeval  separateness  and  self-sufficiency. 
It  has  been  one  of  the  tremendous  tasks  of  the  rail- 
ways to  bind  these  mediaeval  city  states  into  a  unified 
commonwealth  and  people. 

Development  of  the  Lines — State  or  Private 

A  decade  had  practically  passed  since  the  railway 
came  to  the  United  Kingdom  before  the  Italians  were 
attracted  to  this  new  form  of  transportation  and 
communication.  The  first  line,  one  from  Naples  to 
Portici,  was  begun  in  1835-36,  but  was  not  opened  for 

102 


Italy  103 

traffic  until  in  1839.  Its  concessions  came  from  the 
Neapolitan  government,  and  part  of  its  capital  from 
the  French.  The  Lombardian  government  was,  in 
1837,  the  next  to  make  grants  to  railway  companies. 
These  first  lines  were  for  purely  local  use,  largely  for 
passengers  who  travelled  for  pleasure.  The  middle  of 
the  centujy  had  come  before  this  form  of  transporta- 
tion was  seriously  considered  as  a  means  of  conveying 
commodities.  By  this  date  practically  all  the  states 
had  made  concessions  to  companies,  and  something 
had  been  done  toward  the  building  of  local  lines.  The 
first  railway  of  any  important  significance,  as  to 
length  or  traffic,  was  ready  for  operation  by  1857-58 
— a  line  between  Milan  and  Venice,  of  about  190 
miles.  This  important  line  was  the  product  of  both 
private  enterprise  and  state  aid;  to  the  completion 
of  it  the  Austrian  government,  largely  for  military 
reasons,  gave  assistance.  Austria  was  also  at  this 
time  interested  in  a  line  which  should  connect  the 
cities  of  Central  Italy,  and  to  secure  this  the  state  gave 
exemptions  from  taxes  and  a  guarantee  of  interest  on 
the  bonds  for  its  construction.  The  Piedmont  govern- 
ment was  also  more  or  less  active  during  the  decade, 
1850-60;  a  line  from  Turin  to  Genoa  was  opened  by 
1855 — the  work  of  private  capital  and  state  assistance. 
Prior  to  1859-60,  when  the  Italian  kingdom  was 
formed,  the  lines  had  all  been  local  and  disconnected. 
The  railways  of  one  state  did  not  make  connections 
with  those  of  another  state.  There  was  no  national 
scope  or  idea  in  any  of  them.  With  the  coming  of 
political  union  in  Northern  and  Central  Italy  came 
the  spirit  of  united  railways.  The  lines  constructed 
before  this  date,  whether  by  the  state,  or  by  private 


104  Railway  Transportation 

enterprise  with  assistance  from  the  state,  had  the 
general  direction  of  east  and  west — counter  to  the 
natural  channels  of  trade.  The  states  were,  in  fact, 
opposed  to  the  building  of  lines  north  and  south. 
These  wotdd  make  through  channels  of  transportation 
and  communication — the  very  thing  which  the  states 
did  not  wish,  since  it  would  mean  the  destruction  of 
their  long-cherished  separateness.  Had  the  various 
states  been  wilHng  to  abandon  this  spirit  of  local 
independence,  private  capital  would  perhaps  before 
i860  have  constructed  at  least  one  through  line 
between  the  North  and  the  South  of  Italy. 

When  the  new  kingdom  was  created,  there  were  but 
2201  kilometres  of  railways  (1365  miles),  distributed 
as  follows:  in  Piedmont — Sardinia,  850;  in  Lombardy 
— Venice,  607;  in  all  the  other  states,  744.  Some 
of  this  mileage  was  owned  by  the  states,  some  by 
private  corporations.  Now,  under  the  guidance  and 
aid  of  the  new  government,  consolidation  became 
active,  and  more  energetic  effort  was  put  forth  to 
complete  the  lines  in  process  of  construction,  even 
though  Italian  capital  was  very  scarce.  By  1865  the 
mileage  in  operation  had  grown  to  be  more  than  2400, 
and  that  in  process  of  building  was  perhaps  as  much. 
During  the  first  years  of  the  new  kingdom,  the 
Austrian  control  of  the  Hnes  in  the  northern  and 
central  portions  came  to  an  end.  The  Italian  Govern- 
ment purchased  the  stock  which  the  Austrian  state 
had  in  these,  and  assumed  the  guarantee  of  interest 
on  the  construction  bonds.  It  was  not,  however, 
until  1875-78  that  the  Italian  kingdom  had  brought 
to  completion  this  transfer  of  control  and  aid. 

Whether  this  new  state  should  become  the  adminis- 


Italy  105 

trator  of  the  railways,  soon  became  a  vital  question. 
Italian  capital  was,  as  we  have  noted,  very  scarce. 
The  government  wished  to  avert  the  condition  which 
would  necessarily  come  in  case  foreign,  especially 
Austrian  and  French,  capital  should  be  invested  in 
the  railways,  since  Austria  and  France  had  been  the 
chief  obstacles  to  complete  Italian  unity;  and  the 
local  states  had  from  the  first  played  the  important 
r61e  in  railway  construction.  A  law  was,  after  much 
consideration,  enacted  in  1865,  which  answered  for  a 
time  this  question  of  state  operation.  It  ordered  the 
sale  of  the  government  lines  to  the  companies.  It 
created  four  companies  for  the  Italian-Sicilian  lines, 
and  one  for  the  Sardinian,  to  which  were  conceded  the 
operation  of  all  the  existing  mileage  and  the  construc- 
tion and  management  of  the  new  lines  which  should  be 
needed.  The  four  companies  for  Italy  and  Sicily 
were:  (i)  the  Upper  Italy,  to  which  were  conceded 
the  lines  of  Lombardy,  Piedmont,  and  Venice,  though 
the  government  of  Venice  did  not  become  Italian 
until  in  1866;  (2)  the  Roman,  to  which  were  conceded 
the  lines  of  Liguria,  Tuscany,  and  the  Roman  Pro- 
vinces; (3)  the  Southern,  which  was  to  control  all 
the  lines  of  the  mainland  south  of  Rome  except  in 
Calabria;  (4)  the  Calabrian-Sicilian. 

This  answer  in  favour  of  private  ownership  and 
operation,  though  perhaps  meant  to  be  only  a  tem- 
porary one,  relieved  the  new  government  of  a  large 
financial  biu"den,  which  it  was  scarcely  in  a  position  to 
bear.  The  government  secured  the  unity  of  the  lines 
without  bearing  the  financial  burden.  It  made,  how- 
ever, one  grave  error  in  the  creation  of  this  unity.  It 
consoUdated  the  competing  lines  and  not  the  connect- 


io6  Railway  Transportation 

ing  ones ;  it  really  divided  Italy  east  and  west  into  four 
almost  distinct  territories,  when  the  conditions  of 
transportation  demanded  a  through-service  from  north 
to  south.  The  new  state  was,  we  think,  wise  in 
conceding  ownership  and  operation  to  the  companies, 
but  it  was  unwise  in  its  division  of  their  regions  of 
operation.  The  state  received  a  considerable  amount 
of  cash — perhaps  as  much  as  $40,000,000 — ,  when  it 
was  in  serious  need  of  it.  It  did  not  now  need  to 
spend  public  funds  for  railway  building,  though  it 
must,  of  course,  continue  to  bear  the  burdens  of  its 
guarantees  of  interest  on  the  bonds  of  most  of  the 
lines. 

The  railways  were  not  yet  upon  a  basis  of  solid 
prosperity  and  efficiency.  The  Italian  people  were 
poor;  they  were  neither  large  producers  of  commodi- 
ties nor  large  consumers  of  them;  their  spirit  of 
economic  self-sufficiency  meant  no  great  demand  for 
traffic  in  goods  between  the  various  communities. 
Three,  of  the  five  companies,  became  at  an  early  date 
involved.  The  lines  of  one  company  were,  as  we  have 
seen,  separated  from  those  of  another,  and  it  was 
difficult,  if  not  impossible,  to  develop  through-traffic. 
They  were  so  completely  isolated,  and  the  various 
states  were  still  so  largely  independent  of  each  other 
in  matters  of  business,  that  the  companies,  in  spite  of 
the  fact  of  their  large  subsidies  from  the  state,  could 
not  prosper.  It  was  necessary,  in  addition  to  building 
many  new  connecting  lines,  to  put  the  old  ones  upon  a 
more  efficient  footing.  Capital  was  scarce,  even  more 
so  than  usual.  The  tasks  of  the  alliance  with  Prussia 
and  the  War  of  1866,  which  secured  from  Austria  the 
Province  of  Venice,  had  consumed  considerable  capi- 


Italy  107 

tal.  The  Calabrian-Sicilian  Company  found  itself  in 
1867  unable  to  meet  its  obligations,  and  its  ownership 
was  taken  over  by  the  government  in  1868;  and 
between  this  date  and  1880  two  more  of  the  four 
mainland  companies  were  absorbed  by  the  state.  The 
Roman  became  embarrassed  in  1868.  The  state, 
because  of  its  financial  inability  to  purchase  the  lines 
of  this  company,  conceded  them  for  a  time  to  the 
Upper  Italy  Company.  It  did  not  become  the  owner 
of  them  until  in  1880,  and  did  not  take  final  possession 
for  two  years  more.  The  lines  of  the  Upper  Italy 
Company,  though  they  had  been  more  prosperous  than 
the  Calabrian-Sicilian  or  the  Roman,  were,  for  politi- 
cal reasons,  purchased  by  the  state  in  1875-76,  and 
taken  into  state  management  in  1878. 

The  Southern  only  was  left.  Its  lines  were  not 
particularly  efficient  or  prosperous,  though  they  might 
have  been  but  for  the  restrictions  which  had  been 
placed  upon  them  by  the  contracts  for  subsidies  from 
the  state.  Their  power  to  reduce  their  rates,  in  order 
to  develop  new  traffic,  had  been  severely  limited.  The 
government  in  1874  and  1876  made  efforts  to  become 
the  owner  of  these  lines,  since  their  subsidies  were  a 
heavy  burden  upon  the  public  treasury,  but  for  various 
reasons  Parliament  refused  to  approve  such  action  on 
the  part  of  the  administration,  until  in  1907. 

The  practical  failure  of  two  of  the  four  companies 
and  the  financial  burdens  of  all  of  them  upon  the 
state's  revenue  had  brought  to  the  front  the  idea  of 
complete  nationalisation  of  all  the  railways.  There 
had,  moreover,  been  another  purpose  for  state  pur- 
chase. Feelings  of  hostility  toward  Austria  had  been 
intense.    The  Italian  railways  must  be  made  abso- 


io8  Railway  Transportation 

lutely  independent  of  the  Austrian  capitalists.  The 
new  kingdom  of  Italy  became  complete,  in  1866,  when 
Venice  was  won  from  Austria,  and  in  1870,  when  the 
Roman  Provinces  were  freed  from  the  control  of  the 
Pope  and  France. 

By  1878  the  larger  portion,  about  three-fifths,  of 
the  total  mileage  of  approximately  5100  was  in  the 
possession  of  the  state.  For  the  administration  of 
this  net,  special  machinery  was  created.  The  Minister 
of  Public  Works  was  given  general  administrative 
charge.  The  actual  management  was  placed  in  the 
hands  of  a  Council  of  Railway  Administration,  which 
was  composed  of  a  president  and  six  councillors. 
Government  operation  soon,  however,  proved  itself 
unsuccessful,  though  it  was  vigorously  carried  on, 
and  though  it  brought  an  expansion  of  the  lines.  It 
was  in  fact  not  expected  to  be  successful.  The  same 
law  that  created  its  machinery  of  administration 
appointed  a  parliamentary  commission  to  investigate 
the  whole  question  of  state  or  private  operation.  The 
administration  of  Minghetti  and  Spaventa,  Conserva- 
tives, which  made  the  purchases  for  the  state,  had 
meant  that  the  management  should  be  through  the 
companies  acting  as  agents  of  the  state.  The  Con- 
servative ministry  was  driven  out  of  power  by  the 
moderate  Radicals,  in  1876.  Parliament  was,  under 
the  existing  conditions,  opposed  to  the  state  operating 
the  lines  which  had  recently  been  purchased  by  it. 
Minister  Depretis,  in  order  to  carry  out  the  wishes  of 
Parliament,  formulated  a  scheme  of  private  operation. 
His  scheme  proposed  that  the  government  lease  for  a 
term  all  the  state  lines  to  two  companies,  and  that 
they  pay  rent,  as  well  as  a  purchase  price  for  the  state's 


Italy 


109 


rolling-stock.  This  plan  was,  however,  not  for  the 
time  adopted.  A  new  ministry  of  extreme  Radicals 
came  into  power  in  1878,  and  the  whole  matter 
was  again  at  sea — was  referred  to  a  commission  to 
investigate. 

The  commission  put  forth  most  energetic  efforts  to 
ascertain  the  facts  of  state  and  private  management, 
in  Italy  and  elsewhere.  It  laboured  hard,  and  with 
the  utmost  system,  for  almost  three  years;  and  it  cost 
the  public  treasury  more  than  $27,000.  The  work 
of  its  remarkable  investigation,  probably  the  most 
important  ever  made  upon  the  subject  of  railways, 
resulted  in  seven  large  quarto  volumes;  three  of  the 
oral  testimony;  three  of  a  digest  of  the  written  answers 
to  the  questions  sent  to  all  parts  of  Italy  and  of  docu- 
ments; one  of  the  report  or  recommendations  of  the 
commission.  The  digest  of  written  answers  and  the 
documents,  which  cover  all  phases  of  railway  manage- 
ment in  many  states  of  Europe,  are  especially  valuable. 
The  actual  experiences  of  state  operation,  the  theories 
of  rate  making  and  their  influence,  and  the  various 
forms  of  state  regulation  receive  full  consideration. 
The  report,  made  in  1881,  was  overwhelmingly  in 
favour  of  a  lease  of  the  state  lines  for  a  term  of  years 
to  private  corporations.  It  in  fact  made  the  same 
recommendations  as  those  of  the  Depretis  ministry, 
which  were  in  1878  rejected  by  Parliament. 

The  commission  contended  that,  while  the  state 
might  own  the  lines,  it  was  not  its  proper  function  to 
operate  them.  In  support  of  such  a  position,  it  offered 
the  following  facts :  ( i )  that  the  state  does  not  perform 
many  services  more  efficiently  or  cheaper  than  private 
enterprise — a  most  vital  point;  (2)  that  state  operation 


no  Railway  Transportation 

of  railways  is  really  more  expensive  than  private 
operation — a  conclusion  which  the  commission  thought , 
after  long  consideration,  was  fully  warranted;  (3)  that 
the  state  is  more  disposed  to  place  burdens,  as,  for 
instance,  taxes,  upon  industries  than  private  enter- 
prise, that  the  government  is  more  inclined  to  burden 
than  to  foster  the  development  of  industries  by  offering 
efficient  services;  (4)  that  the  danger  of  political 
manipulation  of  the  service  is  really  great. 

The  commission  found  the  actual  conditions  in 
Italy  very  unfavourable.  The  operation  by  the  five 
companies  had  maintained  neither  an  efficient  equip- 
ment nor  an  efficient  service.  They  knew  not  at 
what  time  Parliament  might  vote  to  inaugurate  a 
system  of  state  management.  Their  credit  had  for 
the  larger  part  been  poor;  they  had  operated  under 
conditions  of  separation  of  lines  and  systems,  and  of 
inactivity  in  agriculture  and  industry.  The  manage- 
ment by  the  state  of  its  own  lines  had  been  notably 
inefficient  and  unsuccessful.  The  credit  of  the  state 
lines,  though  they  were  largely  in  Northern  Italy,  the 
most  prosperous  part,  was  low;  the  government  was 
attempting  to  perform  many  functions  upon  an 
income  from  a  people  whose  natural  resources  had 
long  been  well-nigh  exhausted,  and  whose  industrial 
intelligence  had  never  been  great.  Taxes  were  very 
high,  and  the  revenue  from  them  was  comparatively 
slight.  The  lines  of  the  Southern  Company  were  still 
unpaid  for.  The  state  had  in  fact  forfeited  its  right 
to  purchase  them  at  the  old  favourable  price,  and,  in 
order  to  control  them  without  ownership,  it  must  pay 
the  stockholders  annually  a  larger  sum  than  the 
interest  on  such  a  price.     New  lines  were  imperatively 


Italy  III 


demanded  for  a  growth  of  Italian  industries  and 
commerce. 

The  fact  of  these  conditions  had  great  weight 
toward  the  acceptance  of  the  recommendations  of  the 
commission.  A  bill  was  finally,  in  1884,  presented  to 
Parliament,  which  was  now  in  favour  of  lower  taxes 
and  fewer  state  activities,  by  the  man  who  had  acted 
as  the  secretary  of  the  commission,  and  who  in  1884 
had  been  appointed  Minister  of  PubUc  Works.  This 
bill,  which  was  enacted  into  a  law,  provided  for  the 
lease  of  the  state's  lines,  perhaps  until  it  was  able  to 
operate  them,  to  private  corporations.  It  created 
three  such  companies,  to  which  the  state  lines  were 
leased  and  most  of  the  private  lines  conceded:  (i) 
the  Mediterranean,  (2)  the  Adriatic,  (3)  the  Sicilian. 
The  hnes  conceded  to  the  Mediterranean  and  Sicilian 
companies  were  owned  by  the  state.  The  Adriatic 
was  given  the  control  of  some  state  lines  and  of  the 
lines  of  the  Southern,  one  of  the  companies  created  in 
1865,  and  upon  which  the  state  still  paid  subsidies. 
These  companies  held  the  concessions  of  operation  for 
at  least  twenty  years,  possibly  forty  or  sixty.  At  the 
expiration  of  each  period  of  twenty  years,  either  party 
— the  state  or  the  companies — might  withdraw  from 
the  contracts.  These  conventions,  unlike  those  of 
1865,  partitioned  Italy  into  three  natural  traffic  divi- 
sions ;  the  systems  of  the  mainland  were  now  to  cover 
the  whole  length  of  Italy  from  north  to  south.  Each 
company  was,  after  the  French  method,  given  a 
practical  monopoly — a  territory  of  its  own. 

The  larger  part  of  the  railway  mileage,  which  was  in 
1885,  when  the  new  scheme  went  into  force,  about 
6240  (10,066  km.),  was  distributed  among  these  three 


112  Railway  Transportation 

big  companies.  They  were  given  control  of  the 
operation  of  5805  miles  (9364  km.),  divided  as  follows: 
(i)  the  Mediterranean,  4236  km.,  (2)  the  Adriatic, 
4515.  (3)  the  Sicilian,  613.  Small  companies  held  the 
concessions  for  the  remainder,  but  these  were  largely- 
incorporated  into  the  three  systems  by  working  agree- 
ments between  them  and  the  big  companies.  Thus 
for  twenty  years,  until  1905,  most  of  the  lines  were 
operated;  and  during  this  period  the  mileage  of  the 
three  big  companies  increased,  to  practically  7950 
(12,827  km.) — an  important  expansion,  though  not  so 
great  as  had  been  expected. 

The  companies,  at  the  beginning  of  the  conventions, 
paid  the  state  for  the  rolling-stock  275,000,000  lire 
(about  $53,000,000) — a  sum  sufficient  to  make  some 
needed  improvements  and  extensions, — on  the  condi- 
tion that,  at  their  expiration,  the  state  should  repay  the 
companies.  The  companies  agreed  to  maintain  this 
equipment,  in  exchange  for  the  5%  interest  which  the 
state  shotild  pay  to  them  on  its  original  cost.  All  the 
ordinary  operating  expenses,  including  those  of  the 
maintenance  of  roadway  and  structures,  were 
assumed  by  the  companies.  The  extraordinary  ex- 
penses, whether  for  maintenance  of  way  or  permanent 
structures,  fell  upon  the  state,  which  was  the  owner 
of  the  plant.  The  division  of  these  expenses  was, 
of  course,  a  most  difficult  matter — one  liable  to  much 
dispute;  and  so  was  the  division  of  the  earnings  of 
operation. 

Of  the  gross  earnings  of  each  of  the  two  mainland 
companies  up  to  a  fixed  minimum — 100,000,000  lire 
for  one,  112,000,000  for  the  other — ,  62.5%  should  go 
to  the  companies  for  ordinary  expenses  and  profits, 


Italy  113 

27.5%  to  the  state  for  the  use  of  its  lines,  10%  to  a 
reserve  or ' '  property  increase  * '  fund  of  the  state.  This 
reserve  fund  shoiild  be  used  for  extraordinary  repairs, 
renewals  of  rails  and  rolling-stock.  Whenever  the 
gross  earnings  of  these  two  companies  became  larger 
than  the  fixed  minimum,  their  division  was  to  be  as 
follows:  (i)  if  the  excess  above  the  minimum  was  as 
much  as  50,000,000  lire,  56%  should  go  to  the  com- 
panies, 28%  to  the  state,  16%  to  the  reserve  fund  of 
the  state;  (2)  if  the  excess  was  above  50,000,000  lire, 
only  50%  of  it  should  be  distributed  to  the  companies, 
while  6%  of  the  state's  portion  should  be  used  to  make 
reductions  in  the  rates,  at  the  discretion  of  the  govern- 
ment. To  the  Sicilian  Company,  because  of  the 
smallness  of  the  traffic  of  its  lines,  a  much  larger  por- 
tion of  the  gross  earnings  should  be  distributed.  Its 
initial  minimtun  of  gross  receipts  was  fixed  at  8,500,000 
lire,  and  the  company  should  receive  from  82%  to 
72%  of  this  amount.  There  was  also  to  be  a  division 
of  the  dividends,  as  well  as  gross  receipts.  Whenever 
the  dividends  on  the  stock  should  exceed  7.5%,  one- 
half  of  the  excess  should  go  to  the  public  treasury. 

Thus  the  state  was  to  receive  a  portion  of  the  earn- 
ings and  profits  of  operation,  and  to  bear  a  part  of  the 
expenses.  It  was,  in  addition  to  bearing  a  part  of  the 
expenses  of  the  old  lines,  to  pay  to  each  of  the  com- 
panies an  annual  subsidy  of  3000  lire  per  kilometre 
(about  $933  per  mile)  of  the  secondary  lines  con- 
structed by  it. 

The  conventions  were  most  elaborately  drawn,  but 
their  success  depended  upon  the  actual  conditions  of 
commerce  and  industry,  as  well  as  upon  the  efficiency 
of  the  companies'  operation.     The  formtilators  of  the 


114  Railway  Transportation 

conventions  relied  much,  by  far  too  much,  as  was 
later  proven,  upon  a  future  growth  in  the  traffic  and  its 
net  financial  returns.  They  believed  that  such  a 
growth  must  come.  They  allowed  too  many  elements 
of  error  to  enter  into  their  forecast.  The  earnings  of 
operation  did  not  continue  to  increase;  they,  in  fact, 
decreased  soon  after  1885.  The  improvements,  which 
were  to  be  made  from  the  increase  in  the  earnings, 
could  not  be  made.  The  state  must  pay  for  them,  if 
the  needed  improvements  were  made;  it  was  the 
owner  of  the  plant.  The  public  treasury  was,  how- 
ever, carrying  too  great  a  load. 

Another  element  of  error  was  in  the  provision  that 
the  government  should  approve  all  rates.  It  was  the 
original  intention  of  the  authors  of  the  conventions  to 
allow  the  state  only  the  power  to  confirm  rates,  not 
that  of  their  making  in  the  first  instance.  Popular 
demand  for  a  decrease  of  rates  was  so  strong,  that  the 
government  in  reality  made  them,  and,  out  of  the 
public  treasury,  paid  the  companies  the  difference 
between  the  rates  fixed  by  them  and  those  of  the 
state's  making,  even  though  such  action  was  destruc- 
tive to  the  efficiency  of  the  railway  management  and 
harmful  to  the  taxpayer.  The  state  again  interfered 
with  the  efficiency  of  the  companies,  when  it  allied 
itself  with  the  employees,  who  were  about  to  declare  a 
strike.  An  efficient  and  economical  administration 
was,  therefore,  impossible;  and  the  state  did  little 
to  cause  improvements.  It,  in  addition  to  placing 
obstacles  in  the  way  of  the  management  of  the  com- 
panies, allowed  them  to  neglect  the  maintenance 
of  their  equipment  and  service. 

Such  a  situation  could  not  possibly  be  satisfactory 


Italy 


IIS 


to  either  party.  Both  were  ready  enough  in  1905,  the 
first  time  that  they  could  withdraw  from  the  conven- 
tions or  modify  their  provisions,  for  important  changes 
in  their  relationship.  Their  relations  had,  to  be  sure, 
been  agreeable,  but  they  had  not  induced  efficiency  of 
plant  or  of  service.  The  conventions  of  1885  had 
been  a  fiscal  burden  to  the  state,  to  the  extent  of 
$2,000,000  in  1 90 1,  though  it  had  not  maintained  the 
property  in  a  condition  of  efficiency.  The  companies 
had  received  fair  dividends  on  their  stock.  Dr.  C. 
Bresciani  has  calculated  that  the  average  dividend  of 
the  Mediterranean  Company  was  for  the  period  1 885- 
1901 ,  5.15%,  of  the  Adriatic,  6.53%,  and  of  the  Sicilian, 
6.63.*  And  the  dividends  for  1901-04  continued  at  a 
fairly  high  rate:  for  the  Mediterranean,  an  average  of 
3-3%.  ioT  the  Adriatic,  6%,  for  the  Sicilian,  6.8%. 

It  was  under  the  pressure  of  such  a  situation  that  a 
law  was,  on  April  22, 1905,  passed  by  Parliament,  which 
made  provision  for  the  immediate  return  to  state 
operation.  The  bill,  though  a  vitally  important  one, 
received  little  serious  consideration  by  Parliament. 
Many  of  its  members  were  strongly  inclined  to  the 
theory  of  socialism,  though  they  had  no  definite  pro- 
gramme. They  were  ready  to  make  an  experiment 
with  socialised  railways.  It  was,  however,  not  neces- 
sary for  Parliament  to  act  upon  this  vital  matter  in  the 
dark,  since  practically  all  of  the  report  of  a  royal 
commission,  which  had  in  1898  been  appointed  to 
consider  the  whole  case  of  the  railways,  was  before 
them.  This  commission  had  considered  the  question 
whether  the  effects  of  the  conventions  of  1885  made  it 

*  Archiv  fur  Eisenbahnwesen,  1905,  pp.  1017-73. 


ii6  Railway  Transportation 

advisable  for  a  continuance  of  private  operation,  or 
for  a  return  to  state  management.  It  had  made  a 
most  thorough-going  examination — a  work  in  many 
respects  comparable  to  that  of  the  famous  commission 
of  1878-81.  Its  report,  which  appeared  in  1903-06, 
filled  nine  large  quartos,  and  covered  all  possible 
phases  and  every  possible  question  of  railway 
management  in  Italy  and  elsewhere. 

The  law  of  1905  was  only  provisional;  in  1907  a 
more  definite  one  was  passed,  which  also  provided  for 
the  final  purchase  of  the  lines  of  the  Southern  Com- 
pany. This  company,  with  its  2300  kilometres  (1426 
miles),  was  now  the  only  important  example  of  private 
ownership,  and  consequently  the  only  serious  obstacle 
to  state  operation.  Its  lines  must  be  added  to  the 
state  net — a  thing  for  which  the  administration  had 
striven  since  1874-76. 

The  Act  of  1905  put  under  state  operation  approxi- 
mately 11,000  kilometres,  though  a  small  part  of  this 
did  not  belong  to  the  state.  The  government,  accord- 
ing to  the  provisions  of  the  conventions,  paid  for  the 
old  rolling-stock  and  the  new  equipment  purchased 
since  1885.  The  amount  needed  for  this  transfer  from 
company  operation  to  state  management  was  nearly 
500,000,000  lire  ($96,000,000).  By  the  purchase,  in 
1907,  of  the  lines  of  the  Southern  Company,  2300 
kilometres  more  were  added  to  the  state  net  of  opera- 
tion— a  total  of  13,300  kilometres  (8246  miles),  out  of 
the  grand  total  of  aU  the  lines  of  about  16,600  (nearly 
10,300  miles).  The  private  lines  have,  therefore, 
since  1907  been  very  small,  and  most  of  them  have 
been  only  secondary  or  branch  lines. 

The  cost  of  the  construction  of  this  mileage  of  line 


Italy  117 

had  been  upon  an  average  approximately  $109,000  per 
mile.  It  was  $92,000  in  1883,  $121,000  in  1890, 
$128,000  in  1900,  and,  upon  the  state  net,  $127,000 
in  1907.  The  total  cost  had  been  up  to  1907  nearly 
6,000,000,000  lire;  and  during  this  year  Pariiament,  to 
make  up  certain  deficits,  and  to  put  the  lines  upon  a 
footing  of  efficiency,  voted  to  the  Railway  Depart- 
ment, all  of  which  should  be  paid  by  191 1,  the  sum  of 
910,000,000  lire.  This  made  a  grand  total  of  almost 
7,000,000,000  lire.  The  tasks  of  railway  building  in 
Italy  have  been  tremendous;  many  mountains  must 
be  tunnelled  and  many  streams  bridged. 

Has  the  mileage  of  Italy  been  adequate?  We  shall 
answer  this  question  by  giving  the  mileage  at  repre- 
sentative dates  per  100  square  miles  of  area  and  per 
10,000  population,  two  tests  which,  while  not  abso- 
lutely accurate  or  adequate,  are  in  most  general  use. 
Neither  test  gives  Italy  a  very  favourable  showing. 
The  mileage  of  railway  per  each  100  square  miles  of 
area  has  been:  4.19  in  1875,  5.8  in  1885,  8.8  in  1900, 
and  9.3  in  1907-08,  as  compared  with  19.06  in  Great 
Britain.  The  mil|^ge  per  each  unit  of  10,000  popula- 
tion has  been:  1.7  in  1875,  2.17  in  1885,  2.9  in 
1895,  and  3.16  in  1907,  with  5.58  for  the  United 
Kingdom. 

The  history  of  railway  development  in  Italy  has, 
therefore,  been  one  of  many  fluctuations.  The  policy 
of  the  state's  relation  has  been  inconsistent,  and  it  is 
perhaps  still  in  an  experimental  stage.  Throughout 
the  life  of  the  railways,  the  state  has  been  the  largest 
contributor;  it  has  built  most  of  the  lines,  directly,  or 
indirectly  through  subsidies  to  the  companies.  The 
theory  has  all  the  time  been  that  the  state  should  be 


ii8  Railway  Transportation 

the  owner  of  the  roadway  and  permanent  structures, 
and  only  for  short  periods  has  this  theory  been  set 
aside.  Private  enterprise  has  had  permission  only  at 
certain  times  to  play  the  more  active  part  in  railway 
construction  and  operation,  and  then  under  rigid 
supervision  by  the  state.  No  concessions  have  been 
made  to  companies  for  long  periods,  only  for  short 
specified  times,  at  the  end  of  which  the  state  should 
become  the  owner,  and  perhaps  the  manager,  of  the 
lines.  It  would,  in  fact,  have  been  difficult  for  private 
enterprise  unaided  to  build  the  railways.  The  main 
lines  have  from  the  beginning  found  it  difficult  enough 
to  secure  sufficient  income  for  maintenance  and  fair 
returns  on  the  capital  investment.  The  cost  of 
construction  has,  as  we  have  seen,  been  comparatively 
large,  and  that  of  maintenance  and  operation  high. 
The  coefficients  of  operation — the  ratios  of  operating 
expenses  to  income — have  been  for  typical  years: 
67%  in  1885,  68%  in  1890,  75%  in  1895  and 
1900,  68%  in  1903,  73%  in  1906-07,  and  78%  in 
1908-09. 

The  operation  by  the  state  sx^e  1905  has  been 
most  difficult.  A  separate  department  of  administra- 
tion, which  should  be  practically  independent  of  the 
ministry,  was  created,  in  order  to  make  state  manage- 
ment as  far  removed  as  possible  from  partisan  politics. 
The  theory  of  the  machinery  of  operation  was,  there- 
fore, sound  in  at  least  one  aspect.  The  State  Depart- 
ment of  Railways  was,  however,  without  experience 
in  railway  transportation,  and  its  tasks  were  in  conse- 
quence all  the  more  difficult.  There  was,  on  the  other 
hand,  one  very  favourable  element  in  the  situation. 
The  time,  especially  the  first  three  years,  in  which  the 


Italy  1 19 

new  management  went  into  force  was  most  auspicious 
for  railway  transportation.  These  were  years  of  almost 
universal  prosperity  for  the  world.  Italy  had  during 
this  time  growth  in  her  industries  and  expansion  in 
her  commerce,  both  foreign  and  domestic.  The  new 
management  had,  as  was  to  be  expected,  during  these 
three  years  an  increase  in  income;  in  the  case  of  the 
three  great  systems,  of  29%  in  1905-06  over  1900-01, 
of  11%  in  1906-07  over  1905-06,  of  11.5%  in  1907-08 
over  1906-07.  This  increase  in  earnings  was,  more- 
over, not  confined  to  the  period  1 900-08.  From  1 885  to 
1900  it  had  been  important.  A  considerable  portion 
of  this  increase  in  earnings  was,  however,  consmned 
by  the  increase  in  the  cost  of  operation — from  68%  in 
1903  to  78%  in  1908-09. 

The  new  management,  therefore,  fotmd  the  traffic 
situation  highly  favourable,  but  the  condition  of  the 
plant  and  equipment  was  deplorably  inefficient.  The 
companies  had,  as  we  have  seen,  been  allowed  by  the 
state  to  neglect  their  part  of  the  task  of  maintenance ; 
and  the  state  had  been  equally  negligent  in  its  part. 
To  supply  an  effrcient  service  for  a  rapidly  increasing 
volume  of  business  was  for  a  time,  therefore,  almost 
impossible.  The  great  lack  of  efficiency  in  the  plant 
and  its  equipment,  especially  in  the  equipment,  must 
be  met  by  the  new  management  at  the  very  beginning 
of  its  work.  It  was  found  that  about  one-third  of  the 
locomotives  had  been  in  use  for  thirty  years — more 
than  the  lifetime  of  an  efficient  one;  and  much  of  the 
passenger  and  freight  service  equipment  had  been 
used  for  thirty  and  forty  years.  That  the  state  opera- 
tion should  not  make  big  dividends  on  the  capital  for 
at  least  several  years,  was  to  be  expected.     It  made,  in 


I20  Railway  Transportation 

1908-09,  above  operating  expenses,  which  did  not 
include  interest  on  the  debt,  only  1.75% — hardly 
more  than  half  enough  to  pay  the  interest  on  the  state 
railway  debt. 

For  References,  see  Chapter  VIII. 


CHAPTER  VIII 

RAILWAY  TRANSPORTATION  IN  ITALY — (Continued) 

OUR  picture  of  the  Italian  railways — their  mileage, 
capitalisation,  ownership,  and  operation — be- 
comes more  complete  when  we  make  it  cover  their 
traffic  conditions,  their  services  and  rates,  and  the 
ideals  and  machinery  of  the  state's  control. 

(a)  General  Conditions  of  Traffic 

The  traffic  of  the  Italian  railways  has  never  been 
large;  the  gross  earnings  per  kilometre  did  not 
prior  to  1904  exceed  an  average  of  20,000  lire.  Italian 
industries  and  commerce  have  had,  until  within  the 
last  few  years,  a  slow  growth.  The  people  have 
generally  had  a  small  consuming  capacity,  and  as 
producers  they  have  not  been  very  efficient.  Their 
demand  for  products  has  not  been  great;  their  indus- 
trial intelligence  has  been  comparatively  slight;  the 
burdens  which  they  have  borne  in  taxes  have  been 
heavy;  and  their  raw  materials  have  been  few.  In 
1906,  a  fairly  typical  year,  practically  no  coal  was 
mined,  and  the  output  of  pig  iron  was  but  30,450  tons 
— two  fundamentally  vital  groups  of  production  in  a 
number  of  the  nations.  The  natural  resources  of  soil 
and  forest  have  long  been  comparatively  exhausted. 

121 


122  Railway  Transportation 

AH  these  facts,  together  with  the  long  prevailing  spirit 
of  local  self-sufficiency,  have  meant  a  slight  traffic  for 
the  railways. 

In  more  recent  years  there  has,  however,  been  a 
revival  of  industrial  activity.  Manufacture  has  come, 
in  the  northern  portions,  on  a  fairly  large  scale. 
Milan  is  now  an  important  centre  of  the  silk  industry, 
especially  in  the  making  of  raw  silk,  in  which  Italy 
ranks  next  to  China  and  Japan.  The  north  now 
calls  for  the  raw  materials  of  Central  and  Southern 
Italy,  and  also  desires  to  sell  to  these  sections  finished 
products.  The  south  has  in  recent  years  had  a 
growth  in  agriculture,  and  now  sends  to  the  north 
considerable  quantities  of  fruits,  wines,  and  vegetables. 
Thus  long-distance  traffic  for  the  railways  is  being 
made,  both  northward  and  southward,  though  as  yet 
the  north-bound  freight  train  carries  the  more  loaded 
cars.  The  demand  of  Northern  Europe  for  the  com- 
modities of  the  farms,  vineyards,  and  orchards  of 
Southern  Italy  has  come  to  have  a  great  influence  upon 
this  traffic,  and  has  made  exceptionally  low  rates 
for  it.  And  throughout  the  kingdom,  wheat  has 
become  a  very  valuable  product  of  the  soil.  Its 
output  in  1907  was  177,000,000  bushels,  as  compared 
with  634,000,000  for  the  United  States — a  rank  in  the 
world  of  the  sixth  place.  The  total  tonnage  of  the 
railways  has  consequently  had  an  important  increase, 
as,  for  instance,  from  20,000,000  in  1903  to  30,000,000 
in  1907. 

Exports  and  imports  have  had  slight  influence  upon 
the  traffic  of  the  railways.  These  can  to  such  an 
extent  by  ship  come  to  and  go  away  from  the  Italian 
ports,  of  which  there  are  many,  that  long-distance 


Italy  123 

hauls  by  rail  have  been  the  exception,  never  the  rule. 
The  geographical  fact,  that  no  important  centre  is  far 
distant  from  an  excellent  seaport,  has  exercised  a 
profound  influence  upon  the  development  of  the 
mileage  and  the  traffic  of  the  Italian  railways. 

The  slowness  of  the  growth  of  the  railway  traffic  has 
also  been  due  in  part  to  the  complexity  and  inefficiency 
of  the  management.  The  rates  have  not  been  properly 
adjusted  to  develop  the  maximum  of  new  business; 
the  managers  of  the  railways  and  of  the  state's  super- 
vision of  private  operation  have  never  keenly  imder- 
stood  the  vitality  of  the  relationship  which  exists 
between  lower  and  more  elastic  rates  and  an  increase 
of  traffic.  With  one  important  exception,  that  of  the 
Southern  Company  for  the  period  1865-1907,  the 
private  companies  have  not  placed  much  emphasis 
upon  this  relationship.  For  the  private  management, 
the  state  has  exercised  a  rigid  control  over  the  rates ; 
for  the  state  operation,  the  government  has  rigidly 
fixed  the  charges.  For  all  forms  of  management,  the 
state's  supervision  has  been  slow,  cumbersome,  and 
fluctuating  in  policy. 

The  competition  between  the  ocean  ships  and  the 
railways  has,  as  we  have  said,  been  important,  even 
intense;  and  the  state  has  been  forced  to  grant  ex- 
ceptionally low  rail  rates  to  meet  it.  The  influence 
of  the  inland  water  has,  on  the  other  hand,  been  very 
insignificant.  There  has,  to  be  sure,  been  some  inland 
water  traffic  in  the  north-east,  from  Venice  to  Mantua, 
from  Como  to  Milan — about  5,000,000  tons  annually, 
upon  the  2000  miles  of  navigable  waterways.  The 
means  of  the  watenvays  transport  have  been  inef- 
ficient; they  have  hardly  changed  in  a  half  century, 


124  Railway  Transportation 

and  consequently  the  force  of  their  competition  has 
been  very  slight  upon  the  rates  of  the  railways. 

The  classifications  and  rates  have  been  complicated. 
They  were  especially  so  before  1885.  There  was  prior 
to  this  date  practically  no  uniformity  between  the 
lines  of  the  various  companies.  With  the  conventions 
of  1885  came  a  more  uniform  system  of  the  classifica- 
tion of  commodities  and  their  rates,  as  well  as  of  the 
passenger  traffic.  These  conventions  provided  for  a 
practical  monopoly  of  management  to  each  of  the 
three  companies.  Their  lines  were  not  to  have  any 
important  overlapping,  and,  where  this  existed,  the 
competitors  were  to  form  working  agreements.  Since 
1905,  the  return  to  state  operation  of  the  great  major- 
ity of  the  mileage,  the  small  private  companies  have 
not  been  powerful  enough  to  offer  serious  competition 
to  the  state  net.  Classifications  and  rates  have, 
therefore,  since  1885  been  largely  uniform,  but  still 
not  simple.  It  was  provided  in  the  conventions  with 
the  three  companies  that  no  rates  could  be  operative 
until  approved  by  the  Minister  of  Public  Works,  and 
published  by  royal  decree;  and  further  that,  after  their 
operation  for  one  year,  they  should  by  Parliament  be 
declared  as  the  statutory  maxima.  Rates  have,  of 
course,  since  1905  been  made  in  the  first  instance 
by  the  Department  of  Railway  Administration.  The 
Italian  rates  have,  since  1885,  had  the  condition  of 
inelasticity,  which  most  generally  comes  with  statu- 
tory maxima  or  with  state-made  rates. 

(6)  Passenger  Service  and  Rates 

The  passenger  traffic,  as  well  as  the  freight,  has 


Italy  125 

been  comparatively  light.  There  has  been  too  little 
business  activity  to  make  this  heavy;  and  the  travel 
for  pleasure  or  culture  has,  apart  from  that  of  the 
foreigners,  not  been  particiilarly  important.  A  sug- 
gestion as  to  the  volume  of  the  passenger  traffic  of  the 
Italian  railways  is  made  by  the  fact  that  the  per 
capita  trips  of  1900  were,  upon  the  three  big  systems, 
only  1.43,  as  compared  with  27  in  Great  Britain,  12 
in  Germany,  10  in  France,  and  6.9  in  the  United 
States. 

The  passenger  service  has  in  Italy,  as  elsewhere  in 
Europe,  been  divided  into  three  or  four  classes;  it 
has,  for  the  most  part,  been  three.  Here,  as  elsewhere, 
the  bulk  of  the  traffic  has  been  in  the  third-class  service, 
as  may  be  seen  from  the  figures  of  the  fairly  repre- 
sentative year  1899:  3.43%  in  the  first,  19.52%  in  the 
second,  and  76.91%  in  the  third.  The  distance  has 
been  upon  the  whole  short;  the  average  for  all  classes 
was  46  kilometres  in  1875,  43.7  in  1885,  43.3  in  1890, 
48  in  1896,  and  50  (31  miles)  in  1900. 

What  have  been  the  rates?  They  were  in  1885-86 
per  passenger  per  kilometre,  upon  express  trains: 
12.4  centimes  for  the  first  class,  8.7  for  the  second, 
5.65  for  the  third;  for  ordinary  trains,  they  were: 
1 1.3  centimes  (3.5  cents  per  mile),  7.9  (2.45  cents  per 
mile),  6.09  (1.89  cents  per  mile).  By  1896  they  had 
for  all  the  ordinary  trains  decreased  to  the  averages: 
8.68  centimes  for  the  first,  5.78  for  the  second,  3.3  for 
the  third,  3.1  for  the  fourth,  with  an  average  of  all 
classes  of  4.3  centimes  per  kilometre  (1.33  cents  per 
mile).  This  decline  continued  for  a  time,  though  it 
was  only  slight ;  in  1900  the  average  for  all  classes  was 
4.1   centimes  per  kilometre   (1.27   cents   per   mile). 


126  Railway  Transportation 

Then  came  a  period  of  increase,  at  least  in  the  standard 
rates.  These  were  in  1906,  when  a  revision  took 
place,  only  slightly  different  from  the  normal  ones 
in  1885. 

The  revision  of  1906,  which  was,  of  course,  for  the 
state  net,  made  no  important  changes  in  the  rates  for 
journeys  up  to  150  kilometres  (93  miles).  Its  radical 
feature  was  in  the  establishment  of  the  tapering  sys- 
tem of  rates.  Prior  to  this  date  all  rates  had  been  upon 
a  kilometric  basis.  Now  three  divisions  were  made: 
(i)  distances  up  to  150  kilometres,  (2)  from  150  to 
1550.  (3)  beyond  1550.  For  the  first  division  of  traffic 
all  rates  were  fixed  upon  a  rigid  kilometric  basis;  the 
field  of  the  second  division  was  divided  into  many 
zones,  with  tapering  rates  per  zone;  the  total  charge 
for  the  third  division  could  never  become  larger  than 
that  for  the  last  zone  in  the  second,  1541-50  kilometres, 
however  great  the  length  of  the  journey.  The 
standard  rates,  per  kilometre,  for  the  first  division 
were  made  as  follows: 


Class  I 


Class  II 


Class  III 


Express  trains 

Slow  and 
mixed  trains 


12.76  centimes 
11.60     " 


8.93  centimes 
8.12      " 


5.80  centimes 

5-22 


The  rates  for  Classes  I  and  II  were  slightly  higher  than 
those  for  1885,  while  for  Class  III  they  were  somewhat 
lower. 

For  the  traffic  in  the  second  division,  the  zone  sys- 
tem  brought  important  reductions  in  rates   for  all 


Italy 


127 


classes,  especially  for  the  long  journeys,  in  order  that 
Northern  and  Southern  Italy  might  the  more  closely 
be  joined.  This  decrease  may  be  seen  in  the  following 
figures  of  the  total  fares  for  these  representative  dis- 
tances : 


For    160  km. 
For   316-20  km. 
For   636-40  " 
For  1541-50  " 


Class  I 


20.15  lire 
3530    " 
58.40    " 
87.50    " 


Class  II 


14.10  lire 
24.50  " 
38.00  " 
57.80  " 


Class  III 


9.15  lire 
15.85  " 
24-35  " 
36.80  " 


What  the  actual  average  of  the  rates  for  all  classes, 
standard  and  special — return,  season,  and  excursion — , 
has  been  since  the  reform  act,  we  have  not  ascertained 
with  accuracy,  though  it  has  perhaps  been  near  1.25 
cents  per  mile.  The  decrease  in  rates  made  in  1906 
applied  only  to  the  long  distances,  above  ninety-three 
miles;  and,  since  these  journeys  constitute  only  a  very 
small  portion  of  the  total,  the  average  rate  for  all 
services  was  not  materially  changed. 

(c)  Freight  Service  and  Rates 

The  freight  service  has  generally  been  in  Italy,  as  in 
France,  divided  into  two  groups:  (i)  the  fast,  (2)  the 
slow.  The  fast  freight  has  been  qjf  two  classes;  the 
slow,  of  eight  classes. 

The  conveyance  rates  for  the  fast  service  were,  in 
1885,  45.2  centimes  per  ton  (met.)  per  kilometre  for 
the  first  class,  56.5  for  the  second.  The  average  for 
both  classes  was  fifteen  years  later  46.4.     A  slight 


128  Railway  Transportation 

revision  was  made  in  1907,  and  since  that  date  the 
rates  have  been  464  centimes  for  Class  I  and  58  for 
Class  11. 

For  the  slow  service,  the  normal  conveyance  rates 
per  ton  (met.)  per  kilometre  in  1885  were: 


Class  I 

Class  II 

Class  III 

Class  IV  Class  V 

Class 
VI 

Class  ^^  Class  VIII 

16.33 

centimes 

I4.a8  c. 

13.24  c. 

10.30  C. 

8.16  c. 

7.14  c. 

6.13  c.         s  c. 

The  terminal  charges  in  1885  ranged  from  2  lire  per 
ton  for  the  first  class  to  i  .2  lire  for  the  eighth  class. 

The  slow  service  rates  have  had  since  1885  the 
slightest  changes,  toward  an  increase.  The  terminals 
were  in  1907  fixed  at  2.06  lire  per  ton  for  the  first  five 
classes  and  1.23  lire  for  the  last  three.  The  normal 
conveyance  rates  were  at  this  date  made  for  the  eight 
classes  as  follows:  16.48  centimes  per  ton  (met.)  per 
kilometre,  14.42,  12.36,  10.30,  8.24,  7.21,  6.18,  5.15. 

What  of  the  actual  rates?  There  have  been,  in 
addition  to  these  standard  rates,  many  special  ones. 
These  have  most  generally  been  granted  only  for  a 
certain  minimum  shipment  or  for  extraordinary 
requirements  as  to  loading  and  unloading.  The 
minimum,  or  waggon-load,  rates  have  been  general  for 
the  large  majority  of  the  Italian  traffic;  and  for  these 
the  zone  system  has  applied,  though  without  a  clearly 
defined  policy.  For  the  fast  service,  the  zone  system 
has  applied  to  both  distance  and  weight ;  for  the  special 
slow  service,  only  to  distance  There  have  also  been 
exceptional  rates,  usually  granted  to  exports  and 
imports,    and    for   national    purposes.     The    special 


Italy  129 

waggon-load  rates  and  the  exceptional  ones  for  imports 
and  exports  have  been  considerably  lower  than  the 
normal.  The  actual  rates  have,  therefore,  been  much 
lower  than  the  standard.  What  these  have  been, 
and  what  changes  have  been  made  in  them,  may  be 
seen  in  the  figures  which  we  here  give  as  to  their 
average  at  certain  representative  dates:  1.95  cents 
per  short  ton  per  mile  in  1872,  1.97  in  1880,  1.64  in 
1890,  1.57  in  1899,  and  1.56  in  1908. 

•The  fact  that  many  of  the  shippers  have  only  small 
lots  to  transport,  and  the  further  fact  that  the  car- 
load lot  moves  at  a  considerably  lower  rate  per  ton 
than  the  piece  shipment,  have,  of  course,  had  con- 
siderable influence  in  developing  the  business  of  the 
Spediteur  or  shipping  agent.  The  complexity  of  the 
classification  and  rates  has  also  been  an  important 
factor.  The  Italian  goods  rates  have  been  inelastic 
and  high,  as  well  as  complicated;  the  traffic  conditions 
have  not  been  favourable,  and  the  state's  control  has 
been  rigid. 

{d)  Ideals  and  Machinery  of  State  Control — Management 

The  relation  of  the  Italian  state  to  the  railways  has, 
as  we  have  said,  been  very  close  and  vital.  The 
government  has  rigidly  controlled  the  operation  by 
the  companies,  or  it  has  itself  managed  the  lines. 

The  Minister  of  Public  Works  has  been  the  chief 
factor  in  this  control  and  management.  He  has  been 
the  general  administrative  head — the  final  and  author- 
itative officer.  There  has  been  since  1879-a  bureau  of 
railway  inspection  attached  to  the  Ministry  of  Public 
Works,  whose  chief  officer  has  been  the  Inspector 

9 


130  Railway  Transportation 

General  of  Railways,  In  1885  another  body  was 
created  for  the  purpose  of  rendering  aid  and  advice  to 
the  Minister  of  Public  Works.  This  body  consisted 
of  the  minister  of  public  works,  the  inspector  general 
of  the  railways,  the  directing  head  of  the  division  of 
traflEic  and  statistics,  representatives  of  the  ministers  of 
agriculture,  industry,  and  commerce,  and  of  finance, 
representatives  of  the  council  of  the  administration 
of  the  big  companies,  and  others.  Its  functions  were 
largely  advisory.  The  bureau  of  inspection,  which 
was  in  1885  more  definitely  formed,  performed  the 
specific  work  of  inspection  and  report  to  the  minister. 
The  scope  of  the  work  of  all  these  administrative 
bodies  was  as  wide  as  the  possible  phases  of  railway 
operation,  and  their  control  was  effective,  though 
inelastic.  Under  the  supervision  of  such  machinery, 
the  private  companies  could  not  abuse  their  powers. 
These  were  clearly  stated  in  their  concessions  or 
conventions,  and  their  application  was  closely  watched 
by  the  machinery  of  state  control. 

When  the  state  assumed,  in  1905,  the  management 
of  most  of  the  lines,  some  changes  were  made  in  the 
machinery  of  control.  The  state  was  now  to  control 
through  its  own  management.  Government  manage- 
ment, just  as  government  control  of  private  operation, 
was  placed  in  the  hands  of  the  Minister  of  Public  Works 
— under  his  general  supervision.  The  actual  work  of 
administration  was  by  the  acts  of  1905  and  1907 
assigned  to  a  newly  created  administrative  body,  the 
Department  of  State  Railways.  This  body  was  made, 
not  a  part  of  the  regular  machinery  of  administration, 
but  largely  an  independent  one.  It  was  necessary 
that  it  should  be  divorced  from  party  politics  to  the 


Italy  131 

greatest  possible  degree.  It  is  only  in  a  general  way 
responsible  to  the  Ministry.  Its  responsibility  to 
Parliament  is,  however,  more  direct,  perhaps  unfortu- 
nately so.  The  Minister  of  Public  Works  has  the 
power  to  declare  unlawful  its  decisions  and  acts,  but 
he  can  never  substitute  his  own  for  those  suspended 
by  him.  The  Minister  of  Finance  may  inspect  the 
working  of  the  railway  department,  and  report  his 
findings  to  Parliament.  It  is  Parliament  alone  that 
can  seriously  hinder  or  control  its  operations. 

The  department  of  railways  was  in  1905  placed  in 
the  hands  of  a  president,  named  Director  General  of 
Railways,  and  six  members.  In  1907,  the  membership 
was  enlarged  to  eight,  besides  the  presiding  officer. 
This  body  is  called  the  Council  of  Railway  Adminis- 
tration, and  its  members  become,  ex  officio,  state 
officials.  The  members  are  elected  for  two  years,  and 
they  cannot  be  removed  from  office  except  by  royal 
decree,  and  after  the  reasons  have  been  definitely 
stated.  They  are  men  of  expert  knowledge  of  railway 
transportation ;  two  are  from  the  higher  officials  of  the 
state  railways,  three  from  the  officials  of  other  admin- 
istrative departments,  and  three  from  the  ranks  of 
private  citizens.  Its  members  cannot  hold  parliamen- 
tary appointments,  and  the  members  of  Parliament 
are  not  eligible  to  seats  in  the  Council  of  Railway 
Administration. 

There  are,  under  the  direction  of  the  Council  of 
Railway  Administration,  a  central  office  of  inspection, 
which  has  control  of  the  investigation  of  the  technical 
phases  of  operation,  and  a  number  of  central  bureaus, 
that  represent  every  phase  of  railway  management. 
The  lines  are  now  divided  into  ten  districts,  but  the 


132  Railway  Transportation 

number  may  easily  be  changed.  Each  district  has  its 
own  directory  of  administration,  which  must  work 
under  the  general  director  and  the  Council  of  Rail- 
way Administration.  The  actual  details  of  the 
management  are  in  the  hands  of  these  directories;  the 
general  powers  and  work  are  with  the  Council  of  Rail- 
way Administration.  This  general  body  considers  and 
approves  the  new  projects  and  contracts,  the  business 
agreements  and  lawsuits,  the  relations  of  railway 
employees,  and  the  railway  budget.  It  supervises, 
in  a  general  way,  the  actual  operation,  whether  by 
central  or  district  directories.  It  has  great  power; 
it  must  be  consulted  on  numerous  matters ;  it  deliber- 
ates, approves,  confirms,  and  authorises. 

There  is  a  parliamentary  supervisory  committee, 
created  by  the  law  of  1907.  It  contains  six  senators 
and  six  deputies.  It  investigates  and  examines  the 
railway  management,  and  reports  directly  to  the  two 
houses  of  Parliament. 

There  are  also  advisory  councils — a  general  advis- 
ory council,  and  nine  district  advisory  councils,  also 
established  by  the  law  of  1907.  The  general  council 
must  consider  all  propositions  from  the  Council  of 
Railway  Administration  as  to  classification,  rates,  and 
traffic,  and  also  the  reports  of  the  district  councils,  so 
far  as  they  relate  to  matters  of  agriculture,  industry, 
and  commerce.  The  Council  of  Railway  Administra- 
tion is  bound  to  advise  with  the  General  Advisory 
Council.  The  presiding  officer  of  this  council  is  the 
Minister  of  Public  Works.  Its  regular  membership 
includes  representatives  of  all  phases  of  governmental, 
transportational,  or  other  aspects  of  economic  life. 
The  district  cotmcils  perform  for  the  district  direc- 


Italy 


133 


tones  the  same  functions  as  the  General  Advisory  Coun* 
cildoes  for  the  central  directory;  and  their  members 
represent  the  various  interests  concerned  in  the  railway 
transportation  of  their  district — the  state,  as  well  as 
the  agriculture,  industry,  and  commerce  of  the  citizens. 
The  state's  machinery  for  the  management  of  its 
own  lines  is,  in  theory  at  least,  complete  and  adequate. 
Its  real  strength  and  efficiency  depend  upon  the 
ability,  honesty,  and  freedom,  of  its  personnel.  Its 
tasks  have  been  tremendously  great.  Its  results  have 
as  yet  been  only  fair. 

References  on  the  Italian  Railways 
(See  note  to  References  to  Chapter  I.) 

Camera  dei  Deputati:  Atti  delta  Comtnissione  d'Inchiesta  (suU' 
Escercizio  delle  Ferrovie  Italiane),  7  vols.,  1881,  Rome. 

Atti  delta  Reate  Comtnissione  d'Inchiesta  {sui  Rapporti  fra  te 
Societd  .  .  .  ),  4  vols.,  1899,  Rome. 

Atti  delta  Reate  Commissione  per  to  Studio  di  Proposte  .  .  .  , 
vols.  1-8,  10,  1903-06,  Rome. 

Relazione  suit'  Escercizio  delle  Strode  Ferrate  Italiane,  Rome. 

Gazzetta  Ufficiale  del  Regno  d' Italia,  Rome. 

Board  of  Trade  Report,  1910,  London. 

F.  T'di]a.m:  L' Esurcizio  Ferroviario di  Stato  in  Italia,  1906,  Rome. 

F.  Tajani:  La  Riforma  delle  Tariffe  Ferroviarie  Italiane,  1908, 
Milan. 

F.  Tajani:  "Railway  Nationalisation  in  ItaXy,"  Econ.  Jour- 
nal  (Eng.),  Sept.  1908. 

F.  Tajani:  "The  Railway  Situation  in  Italy"  (Q.  J.  Econ., 
Aug.  1909). 

C.  L.  Gasca:  //  Codice  Ferroviario,  4  vols.,  1887-92,  Milan. 
Archiv  fur   Eisenbahnwesen;   especially   three   papers   by   C. 
Bresciani  on  "Die  Eisenbahnfrage  in  Italien,"  Berlin. 

G.  Spera:  U Escercizio  Ferroviario  e  le  possibiti  Riforme  ed 
Economie,  1905,  Rome. 

F.  Ulrich:  Das  Eisenbahntarifwesen,  .  .  .  ,  1886,  Berlin, 


CHAPTER  IX 

RAILWAY  TRANSPORTATION  IN  GERMANY 

IN  Great  Britain  we  have  the  most  complete  example 
of  the  private  railway;  in  Germany,  the  most 
perfect  illustration  of  the  state  railway.  Throughout 
their  history,  the  British  railways  have  been  exclu- 
sively private  in  ownership  and  operation ;  the  German, 
though  practically  all  the  time  mixed,  have  been 
quite  largely  state  in  both  ownership  and  manage- 
ment. The  British  came  the  first,  but  the  German 
had  their  beginnings  not  many  years  later. 

(a)  Development  of  the  Lines — State  or  Private 

The  first  German  line,  a  very  short  one,  was  in  the 
process  of  construction  as  early  as  1832  and  was 
opened  for  traffic  in  1835.  The  early  railways  were 
built  by  private  enterprise  with  occasional  assistance 
from  the  government,  in  the  form  of  direct  purchase 
of  the  stock,  or  indirectly  through  a  guarantee  of 
interest  on  the  bonds  or  stocks.  Railway  construc- 
tion was  prior  to  1843  entirely  done  by  private  enter- 
prise ;  the  state  gave  no  aid,  and  the  citizens  demanded 
considerable  pay  for  the  right-of-way.  The  govern- 
ment treasury  was  not  in  a  favourable  condition,  and 
the  administrative  ofiBcers  had,  at  first,  little  confi- 

134 


Germany  135 

dence  in  the  new  form  of  transportation  and  communi- 
cation. During  the  first  decade  of  their  operation, 
the  state  rendered  only  slight  assistance,  but  soon 
after  1845  the  government  became  more  active  in  its 
aid  to  private  enterprise,  and  also  instituted  a  policy 
of  state  lines. 

Railway  building  came  in  the  German  states — 
there  was  no  real  German  nation  when  it  had  its  birth 
— without  a  definite  plan.  In  France  there  was  at 
the  beginning  a  comprehensive  scheme;  and  all  lines 
came  from  the  centre  of  political  power — Paris. 
Berlin  was  not  then  the  capital  of  the  German  states, 
and  it  was  not  even  the  centre  from  which  the  Prus- 
sian lines  originated  or  focalised.  The  French  lines 
really  had  their  origin  in  politics,  those  of  Germany  in 
business.  The  first  German  lines  were,  as  we  have 
said,  private — to  connect  certain  industrial  and  com- 
mercial centres  for  business  reasons,  but  the  political 
idea  soon  became  a  more  prominent  element.  The 
first  suggestion  of  the  idea  of  a  state  railway  came  as 
early  as  1828,  several  years  before  the  first  line  was 
in  operation.  In  1838  it  assumed  a  more  definite 
form,  though  it  did  not  become  particularly  clear  or 
vigorous  before  the  middle  of  the  century.  By  this 
time,  the  railway  had  clearly  demonstrated  its  perma- 
nent superiority  over  the  other  means  of  transporta- 
tion, and  the  public  treasury  had  become  more  capable 
of  rendering  important  aid  to  private  enterprise  and  to 
state  building. 

A  number  of  the  private  lines  were  not  successful. 
They  had  slight  traffic  of  persons  and  commodities, 
and  capital  had  been  made  timid  by  the  panic  and 
depression  of  1845-48.     The  state,  about  1850,  took 


136  Railway  Transportation 

over  a  ntimber  of  the  embarrassed  lines,  and  also 
entered  upon  the  scheme  of  state  construction.  The 
old  lines  were  scattered  and  disconnected;  they  must 
be  made  into  through  ones.  The  various  parts  of 
Prussia  and  the  other  German  states  were  separated, 
and  for  political  as  well  as  commercial  purposes  they 
must  be  joined.  The  effects  of  the  panic  had  soon 
after  1850  spent  their  force,  and  there  was  an  import- 
ant revival  of  railway  building,  and  of  industries  and 
commerce.  Private  capital  was  eager  enough  to 
invest,  and  the  state  was  ready  to  make  an  important 
contribution,  either  in  aid  to  the  companies  or  in 
construction  of  its  own.  There  had  in  fact  come,  by 
1860-62,  the  spirit  of  expansion,  even  of  the  highly 
speculative  type ;  and  under  the  impulse  of  such  a  spirit 
the  mileage  had  a  great  growth.  There  was,  however, 
as  yet  no  clearly  defined  policy  of  the  state.  There 
was,  in  fact,  a  policy  of  fluctuation  between  the  private 
railway  and  the  state  railway.  There  was  also  much 
confusion  as  to  classification  and  rates.  Uniformity 
had  come  on  neither  the  private  lines  nor  the  state 
net. 

The  formation  of  the  Empire  in  1871,  and  its  ambi- 
tions to  make  a  united  nation  and  people,  brought  to 
the  front  the  desire  for  a  more  definite  policy  of  the 
state  toward  the  railways  and  for  greater  uniformity 
of  service  and  rates.  The  impulse  for  more  complete 
nationalisation  by  the  states,  if  not  indeed  by  the 
Empire,  became  very  strong.  Bismarck  became  a 
tremendous  personality  for  state  railways,  even  im- 
perial railways,  as  he  had  been  for  a  great  and  united 
government.  Prior  to  1874,  the  German  railways 
were,  as  we  have  said,  mixed  in  confusion.     The  small 


Germany  137 

states  had  had  their  own  lines  largely  from  the  begin- 
ning, as  parts  of  the  royal  domain  and  power.  In 
Prussia,  the  dominating  German  state,  there  had 
been  private  lines  and  state  lines.  The  control  which 
the  imperial  constitution  of  1871  gave  was  not  suffi- 
ciently strong  and  effective.  Bismarck  worked  for 
imperial  ownership.  The  foundations  of  such  a  net 
were  laid  in  1871,  when  the  lines  of  Alsace-Lorraine 
came  to  the  Empire,  as  a  result  of  the  Franco-Prussian 
War.  Prussia  was  willing  to  transfer  her  railways  to 
this  net,  but  in  the  smaller  states  the  opposition  to 
such  a  scheme  was  especially  vigorous,  notably  in 
Bavaria  and  Saxony.  The  imperial  plan  had  by 
1875  been  abandoned;  the  opposition  had  been  too 
significant. 

Bismarck  now  more  than  ever  directed  his  energies 
to  the  completion  of  nationalisation  in  his  own  state — 
Prussia.  In  1875  about  44.5%  of  all  the  lines  in 
Germany  were  in  the  hands  of  the  companies,  but 
from  this  date  the  movement  toward  nationalisation 
became  stronger  and  stronger,  especially  after  1879. 
This  movement  had  by  1909-10  produced  a  situation 
overwhelmingly  national.  At  this  date  only  8%  of 
all  the  mileage  of  the  German  states  was  in  the  hands 
of  companies — 2.5%  of  the  chief  and  about  15%  of  the 
branch  lines  (Nebenbahnen) .  The  private  lines  are 
now  nowhere  in  all  Germany  of  great  extent.  In 
some  parts  they  are  numerous,  but  everywhere  they 
are  greatly  limited.  The  most  significant  of  all  the 
state  nets  is  that  of  Prussia-Hesse.  It  controls  all  the 
important  through  lines  in  Northern  Germany,  though 
the  Oldenburg  and  Mecklenburg  state  systems  play 
a  considerable  r61e  in  the  transportation  of  this  section. 


138  Railway  Transportation 


With  the  growth  of  the  idea  of  nationalisation, 
came  a  great  extension  of  the  mileage.  By  the  end  of 
1907  the  normal  tracks  in  Germany  constituted  more 
than  one-sixth  of  the  whole  of  Europe — a  system 
larger  than  that  of  any  other  European  coimtry  with 
the  one  exception — Russia.  The  continuance  of  this 
expansion  has  been  notable,  as  may  be  seen  from  these 
figures  of  fairly  representative  years: 

1840 549  kilometres  (340  miles) 

1850 6,044 

i860 11,633 

1870 19,575 

1880 33,838 

1890 42,869 

1900 51.391 

1908 59,000         "       (36,642  miles) 


Since  the  Prussian  state  net  has  played  such  a 
large  part  in  the  development  of  the  entire  mile- 
age, and  especially  since  it  has  played  such  a 
dominating  r61e  in  the  world's  activity  along  the 
line  of  state  management,  a  detailed  statement  of 
its  growth  should  be  of  considerable  interest.  This 
growth  we  present  in  the  figures  of  what  we  believe 
to  be  typical  dates: 

i860 1 ,497  kilometres  (928  miles) 

1865 1,734 

1875 4,101 

1885 21,027 

1900 30,347 

1910 37,162        "         (23,040  miles) 


Germany  139 

The  Prussian  state  net,  though  it  laid  its  founda- 
tions as  early  as  1848 — in  a  line  built  for  military  pur- 
poses from  Berlin  towards  Russia — ,  had  no  vigorous 
growth  until  after  1875.  Though  Bismarck  had  been  in 
power  since  early  in  i860,  and  though  the  Prussian 
Parliament  had,  in  1873,  resolved  that  the  state  net 
should  as  soon  as  possible  become  an  active  competitor 
of  the  private  lines,  more  than  one-half  of  the  total 
mileage  was  still  in  1879  in  the  hands  of  the  companies. 
State  purchase  and  construction  now  assumed  a 
vigorous  activity;  during  1879-80,  for  instance,  the 
government  acquired  6198  kilometres.  The  total 
length  of  the  state's  purchases  for  1 872-1 904 
amounted  to  the  large  figure  of  15,575  kilometres. 
By  these  purchases,  and  by  the  construction  of 
some  new  lines,  the  state  nets  of  the  East  and  the 
West  were  joined  together.  Cologne  was  now 
connected  with  Berlin  and  points  in  Eastern  Prus- 
sia. The  completion  of  a  unified  state  system 
was  practically  achieved  in  1895-97,  when  the 
short  (928  km.),  though  vitally  important,  net  of 
Hesse  was  combined  with  that  of  Prussia.  The 
completeness  of  the  nationalisation  of  the  Prussian 
lines  may  be  seen  in  the  fact  that  in  1907  there  were 
only  2403  kilometres  of  private  lines,  with  35,550  of 
state;  in  all  Germany  4214  kilometres  private,  52,206 
state. 

Has  Germany  had  a  sufficient  mileage  of  lines? 
Upon  the  bases  (i)  of  mileage  per  each  100  square 
miles  of  area  and  (2)  per  each  unit  of  10,000  population 
— the  most  usual,  though  not  entirely  accurate,  tests 
— ,  Germany  as  a  whole  and  Prussia  as  a  separate 
state  make  this  exhibit: 


140  Railway  Transportation 


ALL  GERMANY 


(I) 

(2) 

1876-77 
1885 

1895-96 

1900 

1908 

5.39  km.  per  100  sq.  km. 
(8.7  miles  per  100  sq.  m.) 
6.9  km.  per  100  sq.  km. 

8.36 

9.22  "       "     "        " 
10.56  km.  (17.03  miles 
per  100  sq.  miles) 

6.82  km.  per  10.000(4.22 

miles  per  10,000) 
8.0  km.  per  10,000 
8.7    •'      "        •• 

8.91 

9.07 ' 

(5.61  miles  per  10,000) 

PRUSSIA  ALONE 

(I) 

(2) 

1876-77 

1885 

1895-96 

1900 

1908 

6.4  km.  per  100  sq.  km. 

7.74 

8.6 ' 

9.94  "       •'       "       " 

(16.03  miles  per  100  sq. 
miles) 

7.91  km.  per  10,000 

8.52 ' 

8.75 

8.93-'      "      "          (5-53 
miles) 

The  German  railways  have  been  constructed  at  a 
comparatively  moderate  cost  per  mile,  much  less  than 
in  Great  Britain,  though  much  more  than  in  the 
United  States.  The  capital  cost,  per  kilometre,  of  the 
Prussian  State  net — more  or  less  typical  of  Germany 
— was  274,993  marks  in  1885,  259,181  in  1890,  257,008 
in  1895,  258,990  in  1900,  263,989  in  1905,  and  290,519 
(or  $111,521  per  mile)  in  1909.  The  cost  in  all  Ger- 
many was,  in  1907,  277,121  marks,  as  compared  with 
336,000  for  all  of  Europe  and  177,334  for  the  United 
States  (June  30,  1906).  The  right-of-way  has  been 
fairly  expensive,  and  the  building  has  in  the  main  been 


Germany  141 

done  with  the  view  of  permanence.  The  difficulties 
in  constructing  the  road-bed  have,  however,  not  been 
great,  especially  for  the  larger  part  of  Germany;  the 
stretches  have  been  over  comparatively  flat  sections, 
and  the  bridges  have  not  been  so  numerous  or  difficult 
to  build.  The  German  lines  in  this  particular  differ 
fundamentally  from  many  of  those  in  Great  Britain, 
France,  Italy,  and  the  United  States. 

The  cost  of  their  operation  has,  on  the  other  hand, 
been,  relative  to  the  general  conditions,  fairly  high. 
To  move  traffic  upon  many  of  the  German  lines, 
especially  those  in  the  northern  parts,  should  not  be 
very  expensive.  The  maintenance  of  the  road-bed 
cannot  be  very  costly,  and  many  of  the  hauls  are  made 
over  only  slight  grades.  Perhaps  the  fairest  and 
most  efficient  method  of  presenting  this  cost,  is  to 
give  the  coefficients  of  operation  for  certain  more 
or  less  representative  years: 

1865 544  % 

1875 66.6  % 

1886 55.4  % 

1895 54.8  % 

1900 61 .02% 

1905 62.67% 

1908 74-62% 

1909 68.99% 

From  1865  to  1903,  the  lowest  ratio  of  operating 
expenses  to  income  was  54.4  (in  1865),  and  the  highest, 
75.3  (in  1873-74). 

While  the  cost  of  operation  has  been  fairly  high,  the 
net  earnings  have  been  very  considerable.     For  the 


142  Railway  Transportation 

long  period  of  1868- 1907,  the  full-gauged  lines  of 
Germany  never  had  an  income  over  cost  of  operation 
less  than  4.5%,  and  in  the  most  prosperous  years  this 
became  as  much  as  6.94%.  The  Prussian  railways 
have  had  an  average  higher  than  that  of  the  lines  of 
Germany  as  a  whole,  as  may  be  seen  in  the  figures  of 
typical  years  and  of  a  long  period  as  a  whole.  The 
earnings  of  operation  over  the  expenses  of  operation 
have  been : 


1882 5-22%  (on  cost  or  capital) 

1885 4-88%  " 

1890 5-26%  " 

1895 6.75%  " 

1900 6.87%  " 

1905 7.13%  " 

1908 4.78%  " 

1909 5-94%  " 


The  lowest  percentage  from  1881  to  1906  was  4.86 
(in  1883),  and  the  highest,  7.13  (in  1905).  During  the 
period  1881-95  the  average  was  5.35%,  and  for  1897- 
1906,  7.08%. 

These  percentages  were,  however,  only  those  of 
operating  income  over  operating  expenses;  and  the 
operating  expenses  did  not  cover  the  interest  on  the 
railway  debt.  When  this  interest  is  subtracted  from 
the  above  percentages — and  this  must  be  done  before 
we  can  ascertain  the  real  net  earnings—,  the  remainders 
are  greatly  reduced.  If  we  estimate  this  interest  at 
an  average  of  3%,  and  add  to  this  a  slight  amount  for 
a  sinking  fund,  we  have  an  average  net  balance  of 
earnings  not  much  above  2%  for  1881-95  and  3.75% 


Germany  143 

for  1 897-1 906.  And  the  state  lines  are  taxed  only 
by  the  local  authorities;  these  in  1906  amounted  to 
only  $221  per  mile,  while  the  British  lines  paid  $1050 
per  mile.  After  all  the  necessary  subtractions  have 
been  made,  the  real  net  income  to  the  state  has, 
nevertheless,  been  important.  This  has  since  1880 
been  large  enough  to  pay  the  interest  on  the  entire 
state  debt,  88.4%  of  which  was  in  1899  the  railway 
debt,  and  74.7%  in  1909,  to  provide  for  an  annual 
sinking  fund  of  one-half  of  one  per  cent.,  and  to  make 
a  large  contribution  to  the  general  state  revenue. 
Such  a  condition  in  the  net  earnings,  though  it  has 
been  highly  favourable  to  the  state  treasury,  has  not, 
we  think,  been  the  best  thing  for  the  maintenance 
and  enlargement  of  the  railway  equipment  or  for  the 
expanding  industries  and  commerce. 

(b)  General  Conditions  of  the  Traffic 

The  German  people  were  tmtil  1870-75  very  largely 
restricted  in  their  economic  efforts  to  agriculture ;  and 
this  fact  exercised  a  most  significant  influence  upon 
railway  transportation.  A  revolution  now  came  in 
German  life — one  of  the  marvellous  industrial  revolu- 
tions of  the  world.  Since  1875  manufacture  has 
come  on  a  large  and  profitable  scale,  and  with  it  all 
the  attending  changes  in  the  conditions  of  life.  At 
this  date,  Germany,  however  great  she  was  in  war, 
was  a  backward  nation  in  the  field  of  industries;  her 
natural  resources  were  not  developed  and  her  indus- 
trial intelligence  was  only  beginning  to  be  notable. 

The  soil  of  Germany  does  not  possess  as  much  fer- 
tility as  that  of  some  of  her  neighbours.     Her  mineral 


144  Railway  Transportation 

resources  are,  on  the  other  hand,  very  considerable, 
though  not  so  large,  or  so  well  situated,  as  those  of 
Great  Britain.  In  geographical  position  she  is  not  so 
fortunate  as  the  United  Kingdom  or  the  United 
States.  Her  people  have,  however,  made  the  most  of 
their  relative  lack  of  superior  advantages.  The  strong 
and  vigorous  character  of  her  citizens,  and  their 
energy  and  thrift,  have  overcome  their  natural  dis- 
advantages. Their  industrial  development  during  the 
last  forty  years  has  been  a  thing  to  be  admired  and 
marvelled  at  by  the  world.  Germany's  population 
has  had  during  these  years  a  large  increase — from  less 
than  41,000,000  in  1870  to  63,000,000  in  1908;  and 
her  industrial  inteUigence  has  increased  still  more 
wonderfully. 

While  the  soil  of  most  of  the  Empire  is  not  particu- 
larly fertile,  still  agriculture  has  to  this  day  been 
fundamental  in  German  economic  life,  as  well  as  in 
politics  and  commercial  policies.  Wheat,  while  it 
puts  Germany  only  in  the  eighth  rank  of  the  world's 
producers,  with  France  in  the  third,  has  exercised  a 
profound  influence  upon  her  life. 

Coal  is  Germany's  most  valuable  mineral  resource, 
but  this  is,  unfortunately  for  many  of  the  present 
industries,  widely  scattered.  Its  principal  fields  are 
far  separated,  and  they  are,  relative  to  those  in  some 
other  countries,  not  very  large.  The  most  important 
ones  are  located  in  the  Ruhr  district,  in  Westphalia, 
in  the  Saar  region  between  the  Rhine  and  the  border 
of  France,  in  Lower  and  Upper  Silesia,  and  in  Saxony. 
The  annual  output  of  these  fields  and  of  other  minor 
ones  places  Germany  in  the  third  rank,  with  the 
United  States  in  the  first  and  Great  Britain  in  the 


Germany  145 

second.  Iron  is  found  in  fairly  large  quantities,  in 
Alsace-Lorraine  and  in  Luxemburg;  Germany  is  now 
second  to  the  United  States  alone  in  the  making  of 
pig  iron  and  steel.  The  work  of  assembling  these 
materials  is,  however,  comparatively  great.  Germany 
must  go  to  a  greater  expense  in  the  collection  of  her 
raw  materials  for  the  making  of  iron  than  England ; 
the  cost  of  their  transportation  is  practically  three 
times  that  of  England.  The  important  plants  for  the 
manufacture  of  iron  and  steel,  all  the  great  ones,  in 
fact,  are  localised  in  the  Lower  Rhine  district.  Some 
of  these  plants  are  more  distant  than  others  from  the 
coal  and  iron-ore  fields,  but  the  total  railway  charges 
are  practically  the  same  for  all,  and  they  are  conse- 
quently upon  the  basis  of  substantial  equality  in  their 
competition  on  common  markets. 

There  are  also  other  important  industries.  In  the 
production  of  chemicals,  Germany  has  little  serious 
rivalry.  The  making  of  the  textiles — cottons,  woollens 
and  silks — engages  a  considerable  portion  of  the 
energies  of  the  people;  and,  that  this  industry  might 
be  as  profitable  as  possible,  its  various  plants  have  in 
the  main  been  located  near  the  coal-fields. 

All  this  industrial  development  has  meant  a  great 
and  diverse  traffic,  passenger  and  commodities — has 
demanded  constantly  increasing  facilities  of  roadway, 
stations,  and  rolling-stock.  The  railway  has  had  seri- 
ous competition  in  the  waterways.  The  waterways  in 
Germany,  to  a  far  greater  degree  than  in  Great  Brit- 
ain or  the  United  States,  have  carried  a  large  volume 
of  traffic.  The  waterways  of  all  kinds  now  have  a 
mileage  of  about  6200,  practically  unchanged  since 
1875,  but  of  this  only  3268  miles  are  important — 1948 


146  Railway  Transportation 

of  free  rivers,  425  of  canalised  rivers,  and  895  of  canals. 
An  increasingly  large  volume  of  traffic  has  since  1875 
moved  upon  these  ways. 

This  water-borne  traffic  has,  however,  been  chiefly 
upon  the  more  important  free  rivers.  Seven  of  these 
carried  in  1875  about  60%  of  the  total  water  traffic, 
and  in  1905  as  much  as  80%.  It  has  been  upon  the 
Rhine,  which  in  traffic  is  the  greatest  inland  water- 
way in  all  Europe,  and  which  is  surpassed  only  by  the 
Great  Lakes,  that  a  large  percentage  has  moved.  The 
Rhine  tonnage  per  mile  has  had  a  wonderful  growth — 
of  613%  during  the  period  1875-1905.  This  one 
river  alone  now  carries  practically  43%  of  the  total 
water-borne  traffic,  and  the  Elbe,  24%.  The  fact  of 
the  Rhine's  tremendous  importance  as  a  carrier  of  do- 
mestic and  foreign  goods,  connected  with  that  of 
the  cheapness  of  water  transportation  as  compared 
with  German  railway  transportation,  is  the  chief 
reason  for  the  location  of  probably  60%  of  the  Ger- 
man manufacturing  plants  near  its  course. 

The  relative  importance  of  the  waterways  and  the 
railways  is  shown  in  the  percentages  of  the  kilometric 
tonnage  of  each.  In  1875  that  by  water  was  21%, 
by  rail,  79%;  in  1905,  by  water,  25%,  by  rail,  75%; 
in  1909,  by  water,  22%,  by  rail,  78%.  It  may  also  be 
seen  in  the  tonnage  of  each.  The  water-borne  traffic 
in  1875  amoimted  to  20,800,000  tons  (met.),  that  of 
1905,  103,400,000.  That  by  rail  was  at  the  same 
dates  167,000,000  and  588,700,000 — about  90%  and 
93%-  The  percentages  of  kilometric  tonnage  and  of 
tonnage  are  very  considerably  different;  the  average 
length  of  haul  was,  in  1875,  by  rail  125  kilometres, 
by  water  280,  in  1905,  by  rail  151,  by  water  290. 


Germany  147 

These  inland  waterways,  which  are,  as  we  have 
said,  serious  competitors  of  the  railways,  especially 
in  the  transportation  of  coal,  ores,  wood,  agrictdtural 
products,  etc.,  have  been  made  navigable  and  main- 
tained at  a  large  public  expense.  The  construction  of 
canals  and  the  canalisation  of  rivers  have  been  done, 
as  a  rule,  by  the  local  states,  and  they  are  their  prop- 
erty. Prussia,  which  has  been  a  leader  in  the  building 
and  maintenance  of  waterways,  as  in  other  enter- 
prises, spent  from  the  public  treasury  during  the  period 
1 8 13-1906  for  their  construction  and  improvement 
more  than  $130,000,000.  The  annual  cost  of  their 
maintenance  has,  moreover,  been  an  important  item 
to  the  government.  In  1905  the  total  expenditures 
were  $4,000,000,  the  total  income  $1,700,000 — a  deficit 
of  $2,300,000.  When  we  add  to  this  deficit  the  inter- 
est at  3.5%  to  4%  on  the  capital  invested  in  water- 
ways, we  have  a  total  yearly  loss  to  the  state  of  nearly 
$7,500,000.  And  the  other  German  states  have 
followed  substantially  the  same  policy. 

All  this  expense  has  been  incurred  by  a  people  who 
possess  a  great  natural  advantage  in  their  rivers.  The 
Weichsel,  a  great  but  as  yet  little  used  stream,  the 
Oder,  the  Spree  and  Havel,  the  Elbe,  the  Weser,  and 
the  Rhine — all  together  make  a  large  and  important 
waterway  net.  These  natural  waterways  have  re- 
ceived from  the  state  much  consideration;  many 
efforts  have  been  made  to  join  them  by  means  of 
lateral  canals — to  improve  them  by  every  possible 
artificial  means.  The  results  of  such  efforts  have 
brought  cheaper  transportation  rates;  and  this  has 
been  well,  except  where  it  has  meant  a  loss  of  traffic 
and  earnings  to  the  railways.     The  fact  that  many  of 


148  Railway  Transportation 

the  places  of  raw  materials  are  far  distant  from  those 
of  their  manufacture,  and  that  the  centres  of  their 
final  conversion  into  finished  products  are  generally  far 
separated  from  those  of  their  ultimate  consumption, 
has  called  for  a  cheap  transportation  service.  The 
government  has  for  the  most  part  pursued  the  policy 
of  making  the  canals  and  canalised  rivers  supplements 
to,  rather  than  competitors  of,  the  railways.  These 
have  been  made  to  relieve  the  railways  of  the  heavy 
burdens  of  traffic,  when  perhaps  a  wiser  thing  would 
have  been  to  increase  the  equipment  of  the  railways 
to  enable  them  to  carry  any  volume  of  traffic. 

The  end  of  canal  building  by  the  state  is  most 
probably  not  yet.  Larger  schemes  have,  in  fact,  been 
proposed  in  more  recent  years,  especially  since  1894. 
They  would  connect  the  Rhine  with  the  present 
Dortmund-Ems  Canal,  and  this  canal  with  the  Elbe. 
The  railways  of  the  great  manufacturing  district  of 
Rhenish  Westphalia  cannot,  without  a  great  outlay 
upon  trackage  and  equipment,  move  the  expanding 
traffic.  Much  of  this  traffic  now  goes  northward 
upon  the  German  rivers,  eastward  upon  the  North 
Sea  or  the  Baltic,  and  southward  upon  the  German 
rivers;  and,  in  its  westward  journey,  over  the  same 
circuitous  route.  The  new  scheme  of  canals  would 
cause  this  traffic  to  move  directly  eastward  and  west- 
ward, all  the  time  within  the  territory  of  Germany. 
The  railways  could  carry  this  traffic,  if  they  had  the 
equipment  which  might  have  come  to  them  from  their 
considerable  net  earnings,  had  the  public  treasury  not 
used  it  in  large  amounts  for  the  general  expenses  of 
the  state,  and  if  they  were  permitted  to  offer  lower 
rates  for  the  long  hauls.     Is  it  an  act  of  wisdom  to 


Germany  149 

levy  a  tax  upon  all  the  Prussians  or  other  Germans, 
in  order  to  develop  the  transportation  facilities  of 
only  a  few  parts — those  which  would  be  served  by  the 
canals? 

The  canal  and  river  craft  compete  with  the  railways 
in  certain  heavy,  bulky,  and  low  value  commodities. 
The  water  craft  rates  are  for  these  goods  generally 
lower  than  those  of  the  railways,  and  they  are  wholly 
unregulated  by  the  government.  In  the  east,  where 
there  is  little  traffic,  they  are  controlled  by  working 
agreements;  in  the  west,  by  competition.  The  river 
craft  pay  no  tolls;  the  canal,  small  ones.  The  railway 
rates  are  quite  rigidly  fixed  by  the  government  upon  a 
distance  basis.  Commodities  cannot  afford  to  move 
in  a  circuitous  way  by  rail ;  the  water  rates  elastically 
adjust  themselves  to  the  conditions  of  the  traffic,  to 
the  disadvantage  of  the  railways. 

For  References,  see  Chapter  XI. 


CHAPTER  X 

RAILWAY  TRANSPORTATION  IN  GERMANY — {Continued) 

A  COUNTRY  which  has  the  industrial  activity  and 
the  culture  of  Germany  always  has  an  important 
passenger  traffic.  It  is,  in  fact,  in  the  passenger 
service  that  the  German  railways  make  their  best  and 
greatest  exhibit,  though  their  freight  service  is  by  far 
the  most  important  source  of  their  earnings.  The 
relative  importance  of  the  two  services  may  be  seen 
in  the  fact  that  in  1900,  for  instance,  28.17%  of  the 
income  was  from  the  passenger,  and  64.36%  from  the 
freight.  It  is,  however,  the  passenger  service  that 
makes  the  state  system  most  popular.  The  German 
railways,  especially  those  of  the  Prussian  state  net, 
have  made  every  effort  to  please  the  masses.  They 
have  in  the  Southern  states  offered  three  classes  of 
service,  and  in  Prussia  four.  They  have  made  the 
effort  to  supply  every  class  of  people  with  a  service  to 
suit  their  special  wishes,  and  with  rates  differentiated 
according  to  their  ability  to  pay. 

(a)  Passenger  Service  and  Rates 

Since  the  nimiber  of  classes  of  service  has  a  profound 
influence  upon  the  average  rate  per  passenger  per  mile, 
we  shall  present  the  figures  of  the  relative  volume  of 

150 


Germany 


151 


the  traffic  in  each  class  on  the  Prussian  state  net  at 
representative  dates: 


Class  I 
Class  II 
Class  III 
Class  IV 
Military 


i860  (Pr.  lines) 


187s  (Pr.  lines) 


43.S% 
32-3% 


1891-92 


190S 


This  table  clearly  demonstrates  that  the  great  bulk 
of  the  passenger  traffic  has  been  in  the  third  and 
fourth  classes.  These  two  classes  combined  had 
69.6%  of  the  total  in  i860,  75.8%  in  1875,  87.9%  in 
1891-92,  and  88.6%  in  1905.  The  grouping  for  all 
Germany  is,  moreover,  only  slightly  different  from 
that  in  Prussia. 

Most  of  the  passengers  have  not  only  travelled  third 
and  fourth  classes,  but  they  have  also  taken  short 
journeys.  In  1903,  a  representative  year,  the  average 
distance  on  the  Prussian  state  lines  was  20.49  kilo- 
metres for  the  third  and  24.26  for  the  fourth,  while  for 
the  second  it  was  30,89  and  for  the  first,  100.84.  The 
average  length  of  trip  has,  in  fact,  for  all  classes  com- 
bined been  comparatively  very  short.  It  was  on  the 
Prussian  state  net  23.73  kilometres  in  1895-96,  24.1  in 
1900,  22.79  ill  1905-  For  the  German  railways  as  a 
whole,  it  has  been  practically  the  same  as  on  the  Prussian. 

The  density  of  traffic  has,  of  course,  been  very 
different  in  different  parts  of  Germany.  It  was,  as 
measured  by  the  per  capita  trips,  in  1898-99,  for 
instance,  nearly  12  for  the  whole  of  Germany,  15.8 
for  Saxony,  and  10  for  the  Prussian-Hessian  state  net. 
Most  of  this  density  has  come  since  1870,  the  begin^ 


152  Railway  Transportation 

ning  of  the  industrial  revolution.  It  was  in  Saxony 
at  this  date  only  2.5,  in  Prussia  2.7.  Since  the  bulk 
of  the  German  traffic  has  been  upon  the  Prussian  lines, 
the  increase  in  its  density,  as  shown  by  the  per  capita 
trips  taken  upon  the  Prussian  state  system,  should  be  a 
matter  of  interest.  This  was  .56  in  1850, 1.2  in  i860,  2.7 
in  1 870, 4.6 in  1 880-8 1, 9.3 in  1890-91, and  loin  1898-99. 

To  the  passenger,  as  well  as  to  the  railway  manage- 
ment, the  question  of  rates  is  a  fundamentally  vital 
one;  the  passenger  desires  the  maximiim  service  at  a 
minimimi  charge,  and  the  railway  manager  strives  for 
maximum  net  earnings  from  the  operation  of  the  ser- 
vice. Has  the  German  railway  manager,  in  order  to 
achieve  his  ideal,  offered  lower  and  lower  rates?  A 
negative  answer  is  given  by  the  standard  rates  per 
passenger  per  kilometre  for  each  class  of  service  upon 
the  Prussian  state  lines,  and  the  Prussian  private  lines 
have  had  substantially  the  same  charges  as  the  state. 

These  rates  were  during  1880-86; 

(Class  I,  9  pf.  per  km.  (3.45  cents  per  mile.) 
Class  II,  6.67  "  "  (2.55"  "  "  ) 
Class  III,  4.67  "  "  (1.79"  "  "  ) 
'  Class  I,  8  pf.  per  km.  (3.07  cents  per  mile.) 
Class  II,  6  ••  " 
(2)  Slow  service     J  Class  III,  4       "      " 

I  Class  IV,  2       "      "     (.768  "      "    ••      ) 
.MU.  Class,  0.5  "      "  ,    , 

These  rates  continued  in  1895  to  be  the  standard, 
and  changes  in  them  were  exceedingly  slight  until 
1907,  when  the  new  reform  was  made.  In  1900  the 
standard  rate  for  the  military  class  was  1.3  pf.,  in  1905 
-07,  I  pf.,  and  working-men  cotdd  travel  on  special 
tickets  at  the  same  fare.    The  standard  rates  for  all 


Germany 


153 


the  German  railways  were  from  1880  to  1907  not 
materially  different  from  those  of  the  Prussian  lines, 
with  the  exception  of  the  fourth  class.  This  service 
did  not  exist  in  South  Germany;  and  the  rates  for 
Classes  II  and  III  were  there  lower  than  in  Prussia, 
while  the  charges  for  express  service  differed  from 
those  for  the  slow  more  in  Southern  than  in  Northern 
Germany. 

By  the  reform  of  1907  certain  changes  were  made, 
though  no  radical  ones.  The  schedule  of  rates  then 
formulated  was  made  to  apply  to  all  of  Germany. 
Now,  after  many  years  of  negotiations  between  the 
various  states  of  the  Empire,  and  much  discussion  in 
the  Reichstag  and  the  Landtag,  uniformity  in  rates  was 
achieved.  The  new  standard  rates  were,  like  the  old, 
divided  into  two  groups:  (i)  express  and  (2)  ordinary. 

The  rates  as  fixed  for  the  ordinary  service  were: 

Class  I,      7  pf.  per  km.     (2.68  cents  per  mile) 

Class  II,    4.5pf.  perkm.  (1.72     ) 

Class  III,  3     "     ,'*    '•     (1.15     • ) 

Class  IV,   2 •     (.768     "      "    "      ) 

For  the  express  service,  the  following  extra  charges 
were  prescribed: 


Classes  I  and  II 


Class  III 


For  I    to  75  km. 
"  76  to  150    *' 
Over  150        " 


.50  marks 
l.oo       " 
2.00       " 


.25  marks 
.50      " 
i.oo     •• 


The  changes  as  instituted  in  1907  were  not  in  reality 
as  great  as  would  appear.   There  were  certain  impor- 


154  Railway  Transportation 

tant  restrictions  placed  upon  the  service,  which  tended 
to  counteract  the  reductions  in  the  charges.  There 
was  now  to  be  no  free  transportation  of  baggage 
except  that  carried  in  the  passenger's  hands;  and  rates 
were  prescribed  for  it,  which  varied  with  the  weight 
and  the  zones  of  distance.  There  was  to  be  no  sale 
of  return  tickets.  The  one-way  ticket  of  the  new 
schedule  costs  slightly  less  than  that  of  the  old,  but 
two  single  tickets  amount  to  more  than  the  former 
return  ticket.  An  imperial  tax,"  varying  for  the 
different  classes  and  with  the  total  charge,  was  now 
levied  upon  all  tickets  of  the  first  three  classes.  The 
standard  rates  have,  therefore,  had  but  slight  decrease. 
That  there  have  been  reductions,  even  important 
ones,  in  the  average  rate  for  all  classes,  is  very  clear, 
but  these  reductions  have  come  through  a  greater  use 
of  the  third-,  fourth-,  and  fifth-class  service,  and 
through  the  sale  of  numerous  special  tickets.  The 
decreases  in  the  average  rates  may  best  be  seen  in 
these  figures,  which  are  taken  from  the  Prussian  state 
system,  at  representative  dates: 

1850,        1.75  cents  per  mile. 
i860,        1.65 


1870,  1.29 
1880-81,  1.39 
1890,  1. 14 
1900,  1. 01 
1909,    .89 


(2.96  pf.  per  km.) 

(2.64  • ) 

(2.32  "    "      "   ) 


» The  tax  varies  as  follows: 

(i)  For  tickets  amounting  to  .60  to  2  marks,  20  pf.  for  Class  I, 
10  for  Class  II,  5  for  Class  III. 

(2)  It  increases  with  the  amount  of  the  total  fare  until  for 
tickets  of  more  than  50  marks  it  becomes  800  pf.  for  Class  1, 40Q 
for  Class  II,  200  for  Class  III. 


Germany  155 

The  decline  in  the  actual  average  rates  has,  there- 
fore, been  very  important.  They  were  in  1909  hardly 
more  than  one-half  of  those  of  1850;  during  the  decade 
closing  with  1909  they  had  decreased  12.45%,  during 
that  of  1 889-1899,  14.2%.  The  Prussian  passenger 
service  has  a  remarkably  clear  record  for  cheapness; 
and  for  the  whole  of  Germany  it  is  but  slightly  differ- 
ent from  that  of  Prussia.  The  German  average  rates 
are  scarcely  one-half  of  the  British  or  the  American. 
The  service  in  Great  Britain,  with  the  three  classes, 
compares  much  more  accurately  with  the  German  and 
its  three,  four,  and  five  classes,  than  with  that  in  the 
United  States,  which  has  but  one  imiversal  first  class 
and  a  second  that  applies  to  certain  sections  only. 
Upon  the  basis  of  the  first  class,  which  in  Germany  has 
not  for  practically  a  half  century  carried  more  than 
4%  of  all  the  traffic,  and  which  in  the  United  States 
has  carried  by  far  the  larger  part  of  it,  the  railways  of 
the  United  States  make  the  best  exhibit  for  cheapness 
of  service;  and  this  service  is,  certainly,  the  equal  of 
the  German.  The  German,  especially  the  Prussian, 
service  for  all  classes  is,  however,  a  remarkably  effi- 
cient one,  when  we  consider  it  in  terms  of  its  rates. 
The  Prussian  passenger  service  is,  upon  the  whole,  a 
worthy  achievement. 

(6)  Freight  Service  and  Rates 

The  commodities  traffic  of  the  German  railways  has 
been  miscellaneous  and,  therefore,  difficult  of  classifica- 
tion. The  systems  of  lines  in  one  state  were  inde- 
pendent of  those  in  another  state  until  afte-  the 
creation  of  the  Empire.  It  was  not  until  1877,  in  the 
so-called  "reform  tariff, "  that  much  serious  effort  was 


156  Railway  Transportation 

made  toward  uniformity  for  all  the  German  states. 
At  a  conference  held  in  Berlin,  in  which  were  represen- 
tatives of  all  the  railways,  a  scheme  of  uniform 
classification  and  rates  was  formulated.  This  made 
in  theory  only  slight  classification,  in  fact  very 
considerable.  It  created  two  general  groups :  (i)  ex- 
press and  (2)  slow  service.  It  divided  the  fast  traffic 
into  three  classes,  and  the  slow  into  one  class  for  piece 
shipments,  two  for  general  waggon-load  lots,  and  four 
for  special  commodities  shipped  in  large  lots.  It  es- 
tablished terminal  charges  and  conveyance  charges. 

The  scheme  of  classes  and  their  conveyance  rates 
of  1877,  stated  in  brief  form,  was  as  follows: 

(I) 
Express  goods,  9.0  cents  per  ton  (met.)  per  mile. 

(2) 

Parcels.  4-5  "      "      "        "        "      " 

A I  (general,  for  J^  car  or 

5000  kg.  lots),  3.0  "      "      "        "        "      " 

B  (general,  for  car  or 

10,000  kg.  lots),  2.5  "      "      "        "        *      *  . 

A2    (grain,  coal,  lum- 
ber, etc.,  for  5000  kg.  ^       -       _ 
lots),                              2.0              "      "        "      "        "      " 

I  (grain,  etc.,  for  10,000 

kg.  lots),  1.8  "      "      "        "        "      " 

II  (lumber,  etc.,  10,000 

kg.  lots),  1.4  "      "      "        "        "      " 

III  (coal,  etc.,  10,000  kg. 

lots),  1.04-0.88  "      ••      "        "        "      " 

The  process  of  uniformity,  which  was  vigorously  at 
work  in  1877,  continued  imtil  it  became  practically 
complete.  The  various  forms  of  the  machinery  of 
the  state's  management  of  its  own  lines  and  of  the 
state's  control  of  the  private  lines  worked  toward  its 


Germany  157 

completion.  There  was  created  an  all-embracinpj 
German  railways'  union — the  Deutscher  Eisenbahn- 
verkehrsverband.  While  certain  modifications  were 
made,  the  scheme  of  classification  and  rates  as  formu- 
lated in  1877  remained  for  a  good  many  years  as  the 
standard,  though  from  this  date  there  was  a  general 
downward  tendency  in  the  actual  rates.  Many  new 
items  were  added  to  the  scheme.  In  1878  there  were 
only  160  items  in  the  normal  tariff;  by  1905  they  had 
grown  to  364.  Some  of  the  old  items  were  transferred 
from  a  higher  to  a  lower  class.  The  greatest  source  of 
the  decrease  in  actual  rates  was,  however,  in  the  exten- 
sion of  the  special  or  exceptional  {Ausnahme)  traffic. 

While  the  actual  rates  have  since  1877  had  a  fairly 
important  decline,  the  average  distance  of  the  haul 
has  not  changed  to  any  noticeable  degree.  On  the 
Prussia  state  lines,  it  was  1 16.7  kilometres  in  1890-91 , 
1 16.6  in  1895-96,  1 1 7. 1  (72.6  miles)  in  1900.  On  the 
German  lines  as  a  whole,  it  was  102.5  kilometres  in 
1900,  98.89  in  1905,  1 14.5  in  1907. 

What  have  been  the  actual  normal  rates?  This 
may  best  be  seen  in  the  following  averages  of  the 
freight  service  (not  Eilgut  or  express)  upon  the 
German  lines,  at  fairly  typical  dates: 

1868,         6.2  pf.  per  ton  (met.)  per  km.  (2.15  cents  per  short  ton 

per  mile.) 
i«8e         i  4-'^7  P^-  P^^  ^°"  (met.)  per  km. 

^'        (  3-84  (Prussian  State). 
1892-93,     3.83  pf.  per  ton  (met.)  per  km. 
mno         i  3-66  pf.  per  ton  (met.)  per  km. 
^  I  3-56  (Prussian  State). 

looc         \  3-50  pf-  per  ton  (met.)  per  km. 
^^'        (  3-55  (Prussian  State). 


^^'        (  3-55  (Prussian  State). 
1907.  3-64  pf.  per  ton  (met.)  per  km.  (1.26  cents  per  short  ton 

per  mile.) 
I909»  3-54  (Prussian  State). 


158  Railway  Transportation 

These  averages  of  the  normal  rates  do  not,  however, 
give  us  a  sufficiently  complete  picture.  What  have 
been  the  details  of  these  rates  in  more  recent  years? 
Since  1877  there  have  remained  the  divisions  of  Eil- 
gut  (express)  and  Frachtgut  (ordinary  freight),  and 
the  size  of  shipments  in  Classes  B,  A2,  I,  II,  III,  has 
not  changed ;  that  of  Ai  has  been  made  to  include  10- ton 
lots  as  well  as  5.  In  1898  the  principle  of  the  tapering 
rate  was  instituted  for  the  piece  shipments,  for  dis- 
tances up  to  500  kilometres  (310  miles).  During  the 
next  year  a  special  class  of  express  was  given  a  rate — 
certain  specified  commodities,  as,  for  instance,  perish- 
able foods  and  plants,  shipped  either  by  piece  or  in  car 
lots.  Special  Classes  I  and  II  are  still  for  certain 
heavy  or  staple  commodities — raw  cotton,  iron,  steel, 
etc.,  and  Class  A2  covers  the  five  to  ten-ton  lots  of  such 
commodities  as  are  designated  in  I  and  II.  The 
following  tables  of  the  normal  conveyance  rates  per 
ton  (met.)  per  kilometre  for  the  period  1890-1910 
give  in  most  strikingly  compact  form  the  details 
of  these  rates: 


(A) 


Stackgut  (Piece  Shipments) 

Eilgut 

Frachtgut 

Ordinary  or 
regular 

Special 

Ordinary  or 
regular 

Special 

(1890-98) 
22  pf. 

ir    pf. 

Spf.  (after  1892) 

(Changes  in  1898) 
To  so  km..  22  pf. 
(7.6  cents  per 
■bort  ton  per  mile) 

zi  pf. 

Germany 

{A)—iContinu*d) 

StUckgut    (Piece  Shipments) 


159 


Eilgut 

Frachtgut 

Ordinary  or 
regular 

Special 

Ordinary  or 
regular 

SpecUl 

51-300  km.,  30  pf. 
301-300  km.,  18  pf. 
301-400  km.,  16  pf. 
401-S00  km.,  14  pf. 
Oversookm.,  13  pf. 
(4.2  cents  per 
short  ton  per  nxile) 

10    " 
1    •• 

(Chan6es  in  1899) 

(As  for  ordinary 
Frachtgut) 

n  pf. .  .6  pf. 

8  pf .  to  6  pf . 
(for  over  726 
km.) 

(B) 
Waggon  Lots  (of  s  or  10  metric  tons) 


Eilgut 

Frachtgut 

Regular 

Special 

Ax 

B 

A3 

I 

II 

Ill 

(1890-98) 
Double  those 
of  Ai    and 
B 

6.7  pf. 

(2.3 

cents 

per  short 

ton  per 

mile) 

6pf. 

(3C.) 

spf. 

(1.7  c.) 

4.5  pf. 
(1.6  c.) 

3.S  pf. 
(1.2  c.) 

(to    100 

km.) 
2.6  pf. 
(.9  c.) 

(over 

100  km.) 

2.3  pf. 

(.76  c.) 

(Changes  in 
1899) 

Simple 
rate  of 
A I  and 
B 

It  will  be  noted,  from  the  above  tables  of  normal 
rates,  which  are  still  in  force,  that  there  have  been 
since  1877  fairly  important  reductions  in  the  rates  for 
all  classes  of  service. 


i6o  Railway  Transportation 

/ 

There  have  been,  moreover,  separate  charges  for 
the  station  services  —  Ahjertigungsgehilhren.  Since 
1890  the  terminal  rates  for  the  regular  Eilgut  have 
been  200  pf.  per  ton  (met.)  for  i-io  kilometres,  up  to 
400  pf.  for  hauls  of  over  100  kilometres.  For  Fracht- 
giit  the  following  have  been  the  charges:  for  Class  Ai, 
from  100  pf.  for  i-io  km.  to  200  pf.  for  over  100 km.; 
for  Class  B,  from  80  pf.  to  120  pf. ;  for  Classes  A2, 1,  II, 
III,  from  80  pf.  to  120  pf.  (since  1897  from  60  pf.  for 
1-50  km.  to  120  pf.).  The  charges  for  fast  piece  ship- 
ments at  special  rates  and  for  slow  piece  shipments  have 
since  1900  ranged  from  100  pf.  for  i-io  km.  to  200  pf. 

In  addition  to  the  normal  class  rates,  there  have 
been  numerous  exceptional  ones.  If  we  take  these 
rates  on  the  Prussian  state  lines  as  an  example,  and 
we  may  do  so  with  fairness,  we  find  that  a  large  volume 
of  the  traffic  has  moved,  not  at  the  regular  class 
rates,  but  at  lower  ones.  At  these  exceptional  charges, 
59.1%  of  all  the  traffic  moved  in  1882,  61.3%  in  1885, 
46.8%  in  1890,  45.6%  in  1895,  64.27%  in  1900,  and 
64.3%  in  1906.  In  1910  there  were  27  exceptional 
commodities  and  31  special  seaport  classes.  These 
commodities  are  quite  largely  the  ores,  wood,  coal,  oil, 
and  raw  materials.  The  raw  material  class,  which  is 
perhaps  the  most  important  of  the  exceptional  rates, 
has  conveyance  charges  of  2.2  pf.  per  ton  per  kilometre 
for  distances  up  to  350  kilometres,  and  1.4  pf.  for 
longer  hauls.     Its  terminal  charges  are  70  pf .  per  ton. 

The  exceptional  rates  are,  therefore,  important. 
They,  in  fact,  constitute  the  really  vital  problem  of 
German  rate  making.  The  rates  were  during  the 
early  years  of  state  management  fixed  largely  upon  a 
rigid  distance  basis.     It  was,  however,  soon  evident 


Germany  i6i 

that  such  a  policy  could  not  be  best  for  the  state 
treasury  or  the  German  industries  and  commerce. 
It  was  in  the  desire  to  keep  the  theory  of  distance- 
rates,  and  at  the  same  time  to  adjust  them  to  the 
demands  of  business,  that  the  exceptional  rates  had 
their  origin.  Their  purposes  have  been  to  promote 
the  growth  of  German  agriculture  and  industry;  to 
enable  German  products  to  compete  on  German  mar- 
kets with  the  imported  commodities;  to  foster  the 
commerce  of  German  centres,  particularly  the  sea- 
ports, in  the  face  of  competition  by  foreigners;  to 
build  up  German  railway  and  water  transportation, 
which  is  always  under  the  stress  of  competition  from 
the  French,  Belgian,  and  Dutch  carriers.  All  these 
reasons  for  granting  exceptional  rates  have  had  their 
defence  in  the  spirit  of  nationalism;  the  state  may 
pursue  any  transportation  policy  that  leads  to  German 
strength  both  political  and  economical. 

Such  rates  have  not  for  the  most  part  been  granted 
to  finished  products,  whether  they  are  sold  in  national 
or  international  markets;  and  in  their  granting  to  other 
commodities  care  has  been  had  that  they  should  injure 
to  the  least  possible  degree  the  interior  interests.  They 
have  been,  as  we  have  seen,  very  nmnerous  for  exports 
and  imports,  but  for  these  solely  when  they  move 
through  German  ports  over  the  sea.  They  have  not, 
of  course,  applied  to  local  carriage;  and  consequently 
the  rates  for  local  transportation  have  been  higher 
than  the  exceptional  over-sea  charges.  The  interests 
of  Hamburg  and  Bremen,  Germany's  great  seaports, 
have  been  tremendously  influential  in  Germany's  rail- 
way policy.  They  must  not  suffer  by  the  competition 
of  Rotterdam  and  Antwerp. 


i62  Railway  Transportation 

The  rigid  distance  rate  is  a  simple  one,  but  it  is 
almost  everywhere  inefficient.  When  the  German 
state  lines  abandoned  it  for  a  part  of  their  traffic,  and 
instituted  the  system  of  exceptional  rates,  they  intro- 
duced great  complexity.  Their  class  rates  have  been 
simple;  their  exceptional  ones,  very  complicated.  A 
complete  set  of  all  the  tariffs  of  the  German  railways 
makes  a  collection  of  915  volumes.  There  were  in 
1908  for  goods  alone  708  different  tariffs — 209  for 
domestic  commodities,  392  for  goods  hauled  between 
Germany  and  foreign  lands,  107  for  foreign  commodi- 
ties carried  through  Germany;  for  live  stock,  120,  and 
for  coal,  87.  The  complexity  of  the  rates,  together 
with  the  fact  that  the  car-load  shipment  moves  at  a 
charge  considerably  less  than  the  piece,  has  in  Ger- 
many, as  in  France  and  Italy,  brought  into  existence 
the  Spediteur  or  shipping  agent.  He  collects  the 
small  lots,  and  holds  them  until  he  can  ship  five  or  ten 
tons — the  normal  capacity  of  most  of  the  cars.  He, 
rather  than  the  real  shipper,  is  the  expert  in  trans- 
portation; and  it  is  he  who  receives  much  of  the 
advantage  of  the  important  difference  between  the 
piece  and  the  car-load  rates. 

The  distance  basis  of  rate  making  has,  as  we  have 
seen,  been  abandoned  for  a  considerable  portion  of  the 
traffic.  This  has  been  done  in  the  exceptional  rates, 
which  for  many  years  have  been  numerous,  especially 
for  the  exports  and  imports.  It  has  since  1898  been 
done  in  the  partial  introduction  of  the  tapering  rate 
for  Eilgut  and  Frachtgut  in  piece  shipments.  Has  it 
been  abandoned  sufficiently?    We  do  not  think  so. 

In  the  case  of  coal,  the  rates  have  perhaps  been 
sufficient  for  all  but  the  longest  hauls — those  which 


Germany  163 

would  place  German  coal  in  the  northern  parts  of  the 
Empire,  which  have  for  many  years  constimed  con- 
siderable quantities  of  foreign  coal.  Most  of  the  coal- 
fields are  comparatively  equidistant  from  the  chief 
centres  of  consumption,  and  a  distance  rate  is  not, 
therefore,  so  much  of  an  obstacle  to  their  development. 
The  raw  materials  which  are  needed  in  the  manufac- 
ture of  iron  and  its  cruder  products  are  so  situated 
relative  to  the  furnaces,  that  the  distance  basis  of 
rates  for  these  need  not  be  materially  abandoned.  The 
products  of  the  farms  of  Eastern  Prussia,  on  the  other 
hand,  demand  a  greater  variation  from  the  distance 
rate,  in  order  to  place  them  in  the  great  manufacturing 
districts  of  Western  Germany — in  locations  where  they 
are  greatly  needed.  The  milk,  butter,  eggs,  vege- 
tables, etc.,  which  the  large  centres  must  consume, 
should  have  a  still  greater  departure  from  the  distance 
rate,  that  a  wider  territory  might  make  profit  out  of 
their  shipments  to  the  centres,  and  that  the  inhabi- 
tants of  these  denser  settlements  might  secure  a  larger 
and  better  supply  at  a  smaller  price.  Berlin  is  forced 
by  the  distance  rate  to  purchase  her  vast  supply  of 
fresh  foods,  etc.,  from  a  small  area,  the  radius  of 
which  is  perhaps  not  more  than  75  or  80  miles,  while 
New  York  secures  hers  from  300  miles  away  and  Lon- 
don, 150-200.  It  has  been  largely  due  to  the  distance 
rate,  that  the  average  length  of  haul  has  long  been 
from  100  to  117  kilometres — a  distance  practically 
the  same  as  that  in  France. 

In  a  number  of  commodities,  the  distance  rate  has 
worked  no  particular  disadvantage  to  their  develop- 
ment. In  others,  it  has  made  it  impossible  for  them 
to  have  the  fullest  growth.     The  principle  of  the 


164  Railway  Transportation 

tapering  rate  needs,  we  think,  a  far  greater  application 
on  the  German  railways  than  it  has  had.  This 
principle  has,  it  is  beheved,  had  a  great  and  whole- 
some effect  upon  the  industries  and  people  of  other 
coimtries.  Prussia  and  the  other  German  states 
would  have  had  more  of  it,  but  for  the  prevalent  local 
jealousies  that  have  existed  between  the  various  parts 
of  the  Empire.  The  east  has  been  kept  too  far  apart 
from]  the  west,  and  the  north  from  the  south.  A 
greater  application  of  the  tapering  rate  would  bring 
these  closer  to  each  other,  to  the  real  welfare  of  each. 
A  wide  application  of  the  tapering  principle  would 
cause  much  more  of  Germany's  traflBc  to  move  directly 
eastward  and  westward;  the  high  distance  rate  has 
been  the  chief  reason  for  the  prevalent  roundabout 
route.  To  secure  the  adoption  of  such  a  principle  of 
rate  making  in  a  country  whose  railways  are  managed 
by  the  state  is,  however,  a  difficult  task.  Local  inter- 
ests and  feelings  of  jealousy  and  self-sufficiency  have 
too  easy  an  opportunity  to  block  the  appHcation  of 
such  a  principle.  They  have  ready  means  of  making 
their  force  felt — ^in  ParHament. 

The  freight  service  of  the  German  railways  has  not 
upon  the  whole  been  equal  in  its  efficiency  to  the 
passenger.  Its  speed  has  been  too  little,  and  its 
charges  have  been  too  inelastic  and  high.  It  is 
claimed,  and  perhaps  with  sufficient  reason,  that  upon 
an  average  the  freight  cars  of  the  Prussian  state  net 
are  in  movement  less  than  four  hours  out  of  each 
twenty-four — that  they  are  in  the  yards  or  upon  the 
side-tracks,  waiting  for  passenger  trains  to  clear  the 
way.  It  is  clearly  evident  that  there  is  need  of  a  much 
greater  mileage  of  third  and  fourth  tracks.  The  passen- 


Germany  165 

ger  trains  are  given  practically  all  the  priority  in  the 
"right-of-way,"  and  upon  a  good  many  stretches  they 
keep  in  almost  constant  use  the  present  two-track 
roadway  during  a  large  part  of  the  twenty-four  hours 
of  the  day.  The  fact  that  two  great  cities  like  Berlin 
and  Hamburg,  for  instance,  should  be  connected,  in 
their  most  direct  route,  by  practically  only  two 
tracks,  makes  it  really  impossible  for  the  fullest  de- 
velopment of  the  freight  trafhc.  The  size  of  the  cars, 
most  of  which  are  of  only  5  and  10  tons'  capacity, 
and  the  smallness  of  the  trains  are  obstacles  to  the 
efficiency  of  this  service.  It  is  here,  in  the  mechanical 
capacity,  that  the  Prussian  railway  management  is, 
we  think,  at  its  weakest. 

The  rates  have  been,  as  we  have  said,  too  inelastic 
in  the  case  of  a  nimiber  of  commodities;  and  they  have 
been  as  a  whole  too  high.  The  public  treasury  has 
been  eager  for  large  sums  from  the  operation  of  the 
lines.  Not  to  secure  an  important  part  of  the  public 
revenue  from  the  net  earnings  of  the  state  railways, 
means  heavier  taxes  upon  the  citizens;  and  this  would 
make  the  administration  less  popular  with  the  masses. 
The  railway  management  has,  we  think,  had  too  much 
care  to  develop  the  passenger  service  to  the  point  of 
the  minimum  of  cheapness,  even  at  the  expense  of  the 
freight  service.  It  has  keenly  appreciated  the  immense 
popularity  which  it  might  have  from  a  larger  and 
cheaper  service  for  the  passenger;  it  has  not  appre- 
ciated the  growth  in  industry  and  commerce,  as  well 
as  in  railway  traffic,  which  would  follow  upon  a 
cheapening  and  an  improvement  of  the  freight  service. 

For  References,  see  Chapter  XI. 


CHAPTER  XI 

RAILWAY  TRANSPORTATION  IN  GERMANY — (Concluded) 

THE  chief  work  of  the  state's  relation  to  the  rail- 
ways was  until  practically  1878  that  of  the 
regulation  of  operation  by  the  companies.  Since  then 
it  has  been  increasingly  that  of  the  management  of 
the  lines  by  the  state  itself.  The  German  railways, 
unlike  the  French,  came  without  any  comprehensive 
scheme.  The  idea  of  their  control  by  the  government, 
however,  became  clear  and  definite  at  an  early  date. 
The  great  Prussian  law  of  1838  made  it  very  clear  that 
the  state  would  regulate  private  operation,  though  it 
was  not  particularly  specific  upon  the  \dtal  point  of 
rates.  The  companies  were  given  by  this  act  the  right 
to  make  their  rates,  but  they  were  required  after  the 
first  three  years  of  operation  to  submit  their  schedules 
to  the  government  for  its  approval.  The  law  also 
provided  for  a  reduction  in  the  rates  by  the  govern- 
ment, in  case  they  should  bring  to  the  companies  more 
than  10%  on  the  capital  invested;  it  also  denied  the 
companies  the  right  to  grant  any  preference  of  treat- 
ment or  rates  to  any  shipper.  The  Minister  of  Com- 
merce, Industry,  etc.,  was  especially  empowered  to 
supervise  the  railway  operation,  in  particular  the 
relationship  of  the  various  lines.  This  official  had 
already  sufficient  tasks  to  perform,  and  in  1848  a 

166— 


Germany  167 

Commissioner  of  Railways  was  appointed,  whose 
function  it  was  to  supervise  the  operation,  for  the 
protection  of  the  shippers  and  the  state.  Since  1895 
the  president  of  each  railway  directory  has  acted  as 
the  commissioner  of  the  private  lines  that  are  located 
within  his  district. 

The  Ideals  and  Machinery  of  State  Control — 
Management 

The  power  of  the  Prussian  state  to  control  the  lines 
of  the  companies  and  their  operation  came  from  the 
right  of  the  government  to  issue  concessions  of  privi- 
leges to  private  citizens  or  corporations,  and  to 
legislate  in  all  matters  of  their  action.  This  power 
expressed  itself  in  (i)  the  oversight  of  the  construction 
of  the  lines  and  of  their  operation,  and  in  (2)  the 
privilege  to  repurchase  them,  or  to  make  use  of  them 
whenever  the  state  needs  to  do  so.  The  railway  was, 
therefore,  considered  from  the  beginning  as  partly 
private  and  partly  public.  It  must  be  operated  with 
the  view  of  industrial  and  commercial  advantage  and 
also  with  the  maximum  justice  to  the  public  and 
maximum  service  to  the  state. 

The  law  of  1838  was  so  significant  and  comprehen- 
sive, as  to  make  almost  complete  the  foundations  of 
the  state's  control  of  private  lines.  It,  like  the  French 
laws  of  1842  and  1845,  was  wonderfully  complete  and 
far-reaching.  Experience,  to  be  sure,  called  attention 
to  certain  points  of  uncertainty  and  of  positive  weak- 
ness. The  act  of  the  Prussian  Landtag  of  1882 
established  a  new  order.  It  provided  for  national 
and  district  railway  councils.     It  made  more  complete 


i68  Railway  Transportation 

the  machinery  of  the  state's  management  of  its  own 
lines.  It  more  fully  provided  for  the  machinery  of 
the  state's  regulation  of  the  private  lines,  and  more 
clearly  defined  the  rights  and  privileges  of  both 
parties — the  company  and  the  government — in  mat- 
ters of  rates;  all  increases  in  rates  were  now  specifically 
put  under  the  control  of  the  state.  In  all  the  points, 
this  law  rested  upon  the  fotmdations  laid  in  1838. 

Some  of  the  changes,  which  were  made  in  1882-83, 
came  out  of  the  fact  of  the  creation  of  the  Empire  and 
its  constitution,  in  187 1.  This  constitution  placed  the 
power  of  the  control  of  rates,  on  all  the  lines,  in  the 
hands  of  the  ofl5cials  of  the  Empire.  Control  now 
became  a  matter  of  the  states  and  the  nation.  The 
Empire  was  given  the  power  to  regulate  all  rates,  to 
reduce  those  for  the  longer  hauls  of  such  important 
commodities  as  coal,  iron,  etc.,  and,  in  times  of  crises, 
to  compel  the  railways  to  carry  grain,  meal,  potatoes, 
and  other  necessary  foodstuffs,  at  very  low  rates.  The 
constitution  gave  to  the  Empire  substantially  the 
same  rights  and  powers  of  control  over  all  the  private 
railways  of  German,  as  the  Prussian  state  had  long 
exercised  over  those  within  its  borders.  The  Empire 
might  grant  charters,  and  it  might  legislate.  It  was, 
in  theory  at  least,  to  exercise  general  supervision  of 
the  building  and  operation  and  especially  of  rates. 
It  cotild  make  use  of  all  the  lines  for  its  own  service  in 
times  of  war,  for  national  defence,  and  it  could  con- 
struct lines  anywhere  in  the  German  states.  There 
was,  however,  one  exception  made  to  the  universality 
of  the  powers  and  rights  of  the  Empire  over  railways ; 
in  Bavaria  it  could  only  legislate. 

Special  imperial  machinery,  for  the  exercise  of  these 


Germany  169 

powers,  was  eariy  created — the  Reichseisenhahnamt, 
in  1873.  It  should  put  forth  effort  to  cement  the 
federal  states  into  a  strong  and  unified  body  in  all 
phases  of  life.  An  attempt  was,  moreover,  made  by 
Bismarck  for  the  Empire  to  purchase  all  the  lines  of 
the  German  states.  Had  his  ambition  been  achieved, 
the  imperial  power  over  railway  transportation  would 
have  become  tremendously  great.  Its  failure  has 
meant  that  imperial  control  has  remained  only  a 
nominal  one.  The  real  control  has  continued,  as 
before,  in  the  hands  of  the  individual  states.  The 
imperial  machinery  has,  however,  been  adequate,  and, 
while  its  supervision  has,  apart  from  the  small  lines  of 
Alsace-Lorraine,  which  the  empire  owns,  been  most 
general,  its  power  for  unification  has  been  very  con- 
siderable.    This  machinery  has  been  as  follows: 

The  two  houses  of  Parliament  have  had,  together, 
the  power  over  all  the  German  railways,  so  far  as 
matters  of  national  defence  and  universal  traffic  are 
concerned. 

The  Kaiser  has  been,  ex-officio,  the  chief  of  the 
imperial  railway  office ;  he  has  appointed  its  members. 
He  has  had  the  power  to  demand  and  to  prescribe 
lower  than  the  normal  rates  for  the  transportation  of 
provisions,  in  case  of  great  emergencies.  He,  in 
connection  with  the  Upper  House  of  Parliament,  may 
call  for  the  conveyance  of  soldiers  and  the  materials 
of  war. 

The  Bundesrath  was  made,  by  the  constitution, 
a  permanent  committee  on  the  railways.  It  was 
empowered  to  execute  all  its  provisions.  The  special 
acts  of  1875-76,  as  well  as  the  constitution,  gave  it  the 
right  to  formulate  schedules  of  rates  for  the  convey- 


170  Railway  Transportation 

ance  of  soldiers,  war  provisions,  and  commodities  of 
the  postal  and  telegraph  service. 

The  Reichseisenhahnamt  has  been  the  executive 
body  of  imperial  control. 

Since  the  Prussian  lines  have  been  by  far  the  domi- 
nating ones  in  all  Germany,  they  have  constantly 
served  as  a  model  for  the  other  states ;  the  machinery 
of  their  control  has  been  substantially  that  of  Prussia. 
A  description  of  the  Prussian  machinery  and  of  its 
work  will,  therefore,  suffice  for  the  whole  of  Germany. 
Of  its  early  development,  we  have  spoken.  What  of 
its  later  history? 

By  the  constitution  of  1850,  the  king  and  the 
two  houses  of  the  Landtag  were  designated  as  the 
dominating  forces  in  the  general  control  over  the  rail- 
ways. They,  however,  delegated  most  of  the  power 
of  actual  control  to  certain  administrative  officials. 

The  Minister  of  Commerce,  Industry,  and  Public 
Works,  was  until  1878  the  chief  of  these.  At  that 
time  this  ministry  was  divided  into  two:  (i)  the 
Ministry  of  Commerce  and  Industry,  (2)  the  Ministry 
of  Public  Works.  To  the  latter  was  assigned  the 
duty  of  the  actual  supervision  of  the  private  lines  in 
Prussia  and  of  the  management  of  the  state  lines.  He 
was  given  large  powers  over  the  direction  of  the  con- 
struction and  operation  of  the  private  lines,  more 
especially  over  the  aid  that  Parliament  shovild  grant 
to  the  companies  and  over  matters  of  safety.  His 
powers  and  duties  have  not  since  that  date  been 
materially  changed,  though  the  organisation  of  the 
machinery  of  state  operation  was  in  1895  modified. 
It  was,  of  course,  impossible  for  the  Minister  of  Public 
Works  to  operate  the  state  roads;  he  could  only  have 


Germany  171 

general  oversight  of  the  special  machinery  of  state 
management.  This  machinery  was  in  1879  changed 
and  enlarged.  The  whole  state  net  was  divided  into 
eleven  districts,  and  for  each  there  was  established  a 
Directory  of  Operation. 

The  directories  of  operation  were  by  this  act  given 
very  large  powers.  They  were,  to  be  sure,  put  under 
the  supervision  of  the  minister  and  the  national  rail- 
way council,  but  only  in  a  general  way.  The  purposes 
of  such  an  organisation  were  to  decentralise  the 
management  as  much  as  possible,  to  secure  the  great- 
est possible  efficiency.  There  had  been  something  of 
the  principle  of  decentralisation  in  the  machinery  of 
operation  as  formed  in  1872.  The  state  net  was  then 
not  very  large,  though  considerably  diverse  as  to  loca- 
tion. By  1879  it  was  at  the  point  of  a  great  exten- 
sion, and  each  directory  must  have  as  far  as  possible 
uniformity  of  conditions  of  operation  and  traffic.  In 
order  that  the  principle  of  decentralisation  might  be 
extended,  twenty  districts,  in  the  place  of  eleven,  were 
in  1895  created;  and,  after  the  incorporation  of  the 
Hessian  lines  with  the  Prussian,  in  1895-97,  another 
was  added. 

Each  directory  of  operation  has  had  its  own  execu- 
tive head,  a  president,  and,  apart  from  the  general 
supervision  of  the  Minister  of  Public  Works,  it  has  been 
an  independently  authoritative  body.  Its  tasks  have 
been  numerous  and  difficult — to  maintain  the  plant 
and  to  secure  and  move  the  traffic.  There  have,  of 
course,  been  special  departments  at  work  within  each 
directory  and  under  its  general  supervision ;  they  have 
been  for  the  construction,  operation,  machinery, 
traffic,  shops,  and  telegraph.     And  since   1895  the 


172  Railway  Transportation 

president  of  each  directory  has  been,  ex-officio,  the 
commissioner  of  the  private  lines  situated  within  his 
district.  These  Hnes,  just  as  the  state's,  have  been 
under  a  unified  supervision — that  of  the  central  office 
of  the  Minister  of  PubHc  Works,  and  that  of  the  inter- 
mediate office  of  the  directory. 

Advisory  coimcils  have  been  instituted,  in  order 
that  the  railway  management  and  the  public  might 
know  each  other's  position  and  point  of  view.  These 
bodies  have  had  the  task  of  considering  all  important 
questions  of  traffic  and  rates,  and  of  making  sugges- 
tions upon  them  to  the  directories.  They  had  their 
origin  in  the  Alsace-Lorraine  Unes,  soon  after  they 
became  the  property  of  the  German  Empire,  in  1874. 
They  were  instituted  in  Prussia  in  1882,  by  a  law  of 
Parliament;  and  their  organisation  was  more  com- 
pletely formed  in  1895.  By  1897  they  had  been  defi- 
nitely organised  and  legalised  in  the  other  German 
states.  Since  1895  there  has  been  in  Prussia,  for  the 
state  Unes:  (i)  a  general  advisory  council,  and  (2) 
nine  district  advisory  councils.  In  each  of  the  other 
German  states  there  has  been  but  one  ad\'isory  council. 

The  General  Advisory  Council  (Landeseisenbahn- 
rath),  which  is  the  adviser  of  the  Minister  of  Public 
Works  on  all  important  matters  of  railway  operation, 
especially  traffic  and  rates,  consists  of  representatives 
of  all  phases  of  Prussian  economic  life.  Its  members 
hold  office  for  a  term  of  three  years  Thirty  of  them 
are  chosen  voluntarily  by  the  district  advisory  coun- 
cils; they  represent  agriculture,  forestry,  trade,  and 
manufacture,  and  are  by  law  distributed  among  the 
provinces  and  cities  of  Prussia.  Ten  more  members 
are  nominated  by  the  Minister  of  PubUc  Works,  to 


Germany  173 

represent  the  ministries  of  agriculture  and  forestry, 
trade  and  industry,  finance,  and  public  works.  The 
directories  must,  by  law,  consult  with  the  national 
as  well  as  the  district  advisory  councils.  At  its  meet- 
ings, which  are  held  twice  each  year,  propositions  from 
the  Minister  of  Public  Works,  and  questions  of  rates 
and  classifications,  are  considered.  Its  decisions  are, 
however,  not  authoritative,  only  advisory.  It  has 
created  a  standing  committee,  which  collects  and 
prepares  business  for  the  council,  and  which  acts  as 
the  leading  element  when  it  is  in  session.  Though  it 
has  been  only  an  advisory  body,  its  work  has,  never- 
theless, been  most  vitally  important.  The  fact  that 
its  members  represent  the  best  sentiment  of  the  various 
interests  in  all  parts  of  the  kingdom,  gives  its  recom- 
mendations and  advice  tremendous  vitality. 

The  District  Cotmcil  (Bezirkseisenbahnrath) ,  nine 
of  which  have  existed  since  1895,  is  more  distinctly 
the  adviser  of  the  directory  of  operation,  which  is 
required  by  law  to  consult  it.  All  its  members  are 
chosen  voluntarily,  to  represent  commerce,  industry, 
agriculture,  and  forestry,  by  the  various  associations 
of  the  district.  The  size  of  its  membership  has  dif- 
fered with  the  economic  importance  of  the  district. 
This  council,  just  as  the  national  one,  has  advisory, 
not  authoritative,  power  over  the  important  questions 
of  traffic  and  rates;  upon  all  these  questions,  it  must 
be  consulted.  It  may  make  suggestions  to  the  man- 
agement of  the  lines.  Its  influence  for  harmony  of 
relations  between  the  railway  management  and  the 
shippers,  and  for  efficiency  of  the  service,  has  been 
very  important. 

The  General  Conference  has  been  another  efficient 


174  Railway  Transportation 

factor  in  the  state's  management.  This  body,  unlike 
the  others  which  we  have  considered,  is  not  instituted 
by  law.  In  its  composition,  it  represents  all  the 
German  railways,  state  or  private,  with  a  membership 
of  approximately  300;  their  voting  power  is  in  propor- 
tion to  the  mileage  of  line  which  they  represent.  It  has 
usually  met  yearly,  at  the  call  of  the  Prussian  Minister 
of  Public  Works.  It  has  made  general  supplementary 
regvdations  of  the  traffic  orders,  rates,  and  classifica- 
tions. It  has  been  most  influential  in  the  movement 
toward  a  complete  uniformity  of  classification  and 
rates. 

The  composition  of  the  General  Conference  has  been 
such  that  it  could  not  easily  act  as  a  whole  body,  and 
it  early  formed  a  small  permanent  body — the  Tariff 
Commission.  The  commission,  which  has  represented 
a  considerable  number  of  railways — in  1908,  for  in- 
stance, fourteen  of  the  principal  German  systems — 
has  prepared  the  plans  and  business  of  the  General 
Conference.  Forming  an  important  part  of  this  tariff 
commission,  has  been  a  Trader's  Committee.  This 
committee  has  represented  all  the  interests  of  the 
shippers;  it  has  held  comparatively  frequent  meetings, 
at  which  have  been  heard  complaints  or  petitions 
from  them.  These  two  bodies  have,  in  fact,  been  the 
vital  parts  of  the  General  Conference,  and  they  have 
been  responsible  for  most  of  its  excellent  work. 

A  German  Railway  Traffic  Association  {Deutscher 
Eisenbahn  Verkehrs  Verband)  was  in  1886  formed, 
primarily  for  the  purpose  of  making  regulations  or 
traffic  orders  for  the  guidance  of  the  officers  of  opera- 
tion— tmiversal  rules  for  the  movement  of  traffic.  It 
has  represented  the  directories  of  the  operation  of  the 


Germany  175 

Prussian  state  net  and  the  administrative  officers  of 
the  other  German  railways,  state  or  private. 

The  Verein  Deutscher  Eisenbahnverwaltungen,  an- 
other extra  legal  association,  has  performed  efficient 
service,  especially  in  the  making  of  regulations  for  the 
interchange  of  traffic  between  the  different  railways, 
and  in  the  creation  of  interline  service.  This  associa- 
tion of  railway  managements,  organised  in  Prussia 
as  far  back  as  1846,  has  grown  to  be  very  large 
and  influential;  it  now  has  in  its  membership  many 
lines,  a  number  in  addition  to  those  of  the  German 
states. 

The  machinery  of  the  regulation  by  the  state  of  the 
private  lines,  and  of  the  management  by  the  state  of 
its  own  lines,  has  been  elaborate  and  comprehensive. 
Its  ideals  have  been  to  maintain  the  condition  of 
maximum  justice  to  the  public  in  the  case  of  private 
operation,  and  of  maximum  efficiency  and  cheapness 
of  service  in  the  case  of  state  operation.  State  regula- 
tion, though  it  did  not  prior  to  1878-79  prevent  some 
abusive  discriminations,  has  upon  the  whole  been 
efficient.  Its  task  has,  however,  become  increasingly 
slight.  The  great  and  vital  work  in  the  state's  relation 
to  the  railways  has  in  Germany  become  more  and 
more  one  of  operation,  not  regulation;  and  the  state's 
operation  has,  we  believe,  long  been  comparatively 
efficient.  The  success  of  the  Prussian  net  has  in  many 
respects  been  worthy — the  best  illustration  of  state 
management  in  the  world.  This  success  has,  however, 
been  due  to  the  fact  that  Prussia  has  possessed  a 
marvellously  efficient  administration — to  the  fact  that 
her  king  has,  in  spite  of  public  sentiment,  appointed 
and  kept  in  office  capable  men.     While  questions  of 


176  Railway  Transportation 

railway  finance  and  rates  have  at  times  become  the 
subject  of  partisan  politics,  the  officers  of  the  State 
Railway  Department  have  been  independent  of  polit- 
ical fluctuations.  The  success  of  Prussia  is  clear,  but 
it  offers  no  proof  whatever  of  success  in  the  United 
States,  where  the  administration  is  nowhere  central- 
ised and  permanent,  and  where  politics  may  still  do 
wonderfully  strange  deeds. 

References  on  the  German  Railways 
(See  note  to  References  to  Chapter  I.) 

'  Archiv  fiir  Eisenbahnwesen,  Berlin. 

Statistik  der  im  Betriebe  befindlichen  Eisenbahnen  Deutschlands, 
Berlin. 

Statistische  Nachrichten  von  den  Eisenbahnen  des  Vereins 
Deutsche  Eisenbahnverwaltung,  Berlin. 

Bericht  uber  die  Ergebnisse  des  Betriebs  der  preussischen  Staats- 
eisenbahnen,  Berlin. 

Die  Verwaltung  der  offentlichen  Arbeiten  in  Preussen  i8go  bis 
igoo;  also  for  1900-10,  Berlin. 

G.  Eger:  Handbuch  des  Preussischen  Eisenbahnrechts,  2  vols., 
1889-96,  Breslau. 

G.  Eger:  Die  geschichtliche  Entwicklung  des  Eisenbahn-Trans- 
portrechts  in  Preussen,  1895,  Munich. 

F.  Ulrich:  Das  Eisenbahntarifwesen  im  Allgemeinen  .  .  .  , 
1886,  Berlin. 

F.  Ulrich:  Preussische  Verkehrspolitik  und  Staatsfinanzen,  1909, 
Berlin. 

W.  Cauer:  Betrieb  und  Verkehr  der  Preussischen  Staatsbahtien, 
2  vols.,  1897-1903,  Berlin. 

Seidler  und  Freund:  Die  Eisenbahntarife  in  ihren  Beziehungen 
zur  Handelspolitik,  1904,  Leipzig. 

H.  Burmeister:  Geschichtliche  Entwicklung  des  GiUertarif- 
wesens  der  Eisenbahnen  Deutschlands,  1899,  Leipzig. 

W.  Lotz:  Verkehr sentwickelung  in  Deutschland  1800-1900  {zur 
Cegenwart),  19 10,  Leipzig. 


Germany  177 

H.  Schwabe:  Geschichtlicher  Ruckblick  auf  die  ersten  so  Jahre 
des  Preussischen  Eisenbahnwesens,  1895,  Berlin. 

H.  Schwabe:  Uber  die  Ermdssigung  der  GOtertarife  .  .  .  ,  1904, 
Berlin. 

Board  of  Trade  Report,  1908,  London. 

Zeitschrift  fur  Binnenschiffahrt. 

E.  Fochier:  L' Exploitation  des  Chemins  de  Fer  par  I'Etat  en 
Allemagne,  1901,  Paris. 


V  ^ 


CHAPTER  XII 

RAILWAY    TRANSPORTATION    IN    THE    UNITED    STATES 

THE  railways  of  the  United  States  have  .been  most 
notable  for  the  extent  of  their  mileage,  for  the 
rapidity  of  their  growth,  and  for  the  capacity  of  their 
locomotives  and  rolling  stock.  They  have  not  been 
as  exclusively  private  as  in  Great  Britain,  though  their 
building  has  been  largely  by  private  enterprise,  and 
their  operation  almost  entirely  by  companies.  Their 
regulation  by  the  state  has  been  in  all  the  fundamental 
points  like  that  of  the  United  Kingdom,  if  not  indeed 
a  copy  of  it.  Their  traffic  conditions  have  been  unlike 
those  of  the  British  lines,  and  not  very  similar  to  those 
in  Germany. 

(a)  Development  of  the  Lines 

Throughout  their  colonial  period,  the  people  of  the 
United  States  had  no  means  of  transportation  but 
the  natural  waterway  and  the  crudest  kind  of  a  high- 
way. The  inefficiency  of  this  form  of  transportation 
may  be  seen  in  the  fact  that  it  required  a  week  to 
travel  from  Boston  to  New  York,  and  from  a  month  to 
five  weeks  from  Boston  to  the  extreme  southern  parts 
of  the  provinces.  There  could,  of  course,  be  no  such 
a  thing  as  a  long-distance  overland  haul  of  goods;  and 

178 


United  States  179 

that  for  persons  was  expensive  and  tedious,  if  not 
indeed  dangerous. 

The  first  efforts  toward  more  efficient  transportation 
and  communication  were  in  the  improvement  of  the 
highway — the  turnpike — ,  in  order  that  the  various 
small  towns  might  be  more  closely  connected  with  each 
other,  and  that  these  might  have  closer  relationship 
with  the  vast  rural  sections.  The  turnpike  meant 
longer  distance  hauls  of  persons  and  commodities.  It 
also  meant  an  extension  of  state  activity.  The  old 
highway  had  been  constructed  and  maintained  solely 
by  the  local  authorities,  but  the  new  one  was  the  work 
of  the  state,  even  of  the  nation.  The  more  general 
authorities  assumed  much  of  the  burden  of  this 
improvement  of  the  means  of  transportation,  for 
political,  as  well  as  economic,  reasons.  The  power 
of  the  nation  was  then  comparatively  weak;  long- 
distance transportation  would  strengthen  it.  Many 
bills  for  national  aid  were  presented  to  Congress  in 
1828  and  later,  but  little  assistance  was  actually 
granted  to  the  turnpikes  except  in  the  case  of  the 
famous  Cumberland  Road  between  Washington  and 
Wheeling — possibly  to  the  Mississippi  River — to  which 
the  nation  granted  by  1837  as  much  as  $4,300,000. 
This  highway  had  its  beginnings  in  1806,  at  Ctunber- 
land,  Maryland,  and  it  finally  stretched  its  course  to 
Vandalia,  in  Central  Illinois.  Had  the  railway  not 
at  an  early  date  demonstrated  its  great  superiority 
over  the  highway  as  a  long  distance  carrier,  the 
Cumberland  Road  would  have  ultimately  established 
its  western  terminus  in  Missouri. 

The  new  highway — the  turnpike — ,  like  many  other 
things,  came  to  the  United  States,  in   1790,   from 


i8o  Railway  Transportation 

Great  Britain.  It  was  confined  to  the  Middle  and 
New  England  States ;  and  here  it  proved  its  success  as 
a  local  carrier,  both  in  its  influence  upon  the  indus- 
tries and  in  its  financial  returns. 

The  canal  was  another  of  the  early  forms  of  trans- 
portation. It,  like  the  turnpike,  was  for  the  purpose 
of  connecting  the  seaboard  with  the  valleys  beyond 
the  Alleghany  Mountains.  Population  was  steadily 
moving  from  the  East,  where  land  was  less  free,  over 
into  the  valleys  of  the  Ohio  and  the  Mississippi.  The 
national  turnpike  greatly  facilitated  this  strong  west- 
ward movement,  but  a  level  route,  rather  than  a  short 
one,  was  needed.  Two  plans  were,  under  the  impulse 
of  this  need,  made:  (i)  a  canal  connecting  the  Hud- 
son River  with  Lake  Erie  or  Ontario,  through  a 
territory  which  had  no  high  ranges  of  mountains;  (2) 
a  canal  between  the  Chesapeake  and  the  Ohio  River — 
a  longer,  less  level,  but  more  central  way. 

Efforts  were  made  for  the  Erie  route  as  early  as 
1792,  and  they  came  to  a  successful  result  by  1825. 
To  perform  this  great  task,  the  resources  of  the  State 
of  New  York  had  been  taxed.  Its  construction  cost 
$5,700,000,  a  large  sum  for  those  days,  but  it  brought 
great  reductions  in  long-distance  transportation  rates. 
Though  its  charges  were  comparatively  very  small,  it 
yielded,  until  1852,  a  considerable  profit.  From  this 
date,  the  competition  of  the  railways  became  more 
vigorous,  and  after  1870  the  canal  had  difficulty  in 
bearing  the  costs  of  maintenance.  This  canal  proved 
its  distinct  superiority  over  the  turnpike  as  a  long- 
distance carrier,  even  though  it  lost  in  its  rivalry  with 
the  railway. 

The  Erie  Canal,  while  it  was  the  most  notable,  was 


United  States  i8i 

byno  means  the  only  one  of  importance.  A  number 
of  States  constructed  canals,  or  gave  aid  to  their 
building;  from  1815  to  1837  there  was  wide-spread 
activity  in  canal  construction.  Their  success,  as  an 
investment,  was,  however,  not  particularly  good,  and 
this  fact,  together  with  the  scarcity  of  capital  after 
the  panic  of  1837,  meant  that  canal  building  would 
have  to  wait,  if  not  entirely  come  to  an  end.  The 
railway  was  in  the  meantime  growing  rapidly,  in  its 
extent  and  in  the  proof  of  its  permanent  superiority 
over  the  canal  for  practically  all  kinds  of  traffic.  In 
speed,  and  in  facility  for  loading  and  unloading,  and 
warehousing,  the  railway  was  clearly  the  more 
efficient  means  of  transportation,  most  certainly  for 
long  distances. 

The  railway  came  suddenly,  in  the  midst  of  turnpike 
and  canal  building.  The  railway  in  the  United  States, 
unlike  its  early  reception  in  Great  Britain  and  on  the 
Continent  of  Europe,  had  a  royal  welcome;  a  charter 
with  almost  unlimited  powers  and  privileges  came 
to  it  for  the  asking.  When  this  new  form  of  trans- 
portation and  communication  came,  it  was  only  an 
improved  horse-car  moved  upon  wooden  rails.  The 
most  notable  of  these  horse-car  railways  were  those 
of  the  Mauch  Chunk  Railroad,  completed  by  the  close 
of  1827,  and  the  Carbondale  and  Honesdale,  a  line 
constructed  in  1828,  by  the  Delaware  and  Hudson 
Canal  Company.  It  was  upon  the  latter  line,  that 
the  first  locomotive  ever  seen  in  the  United  States, 
one  imported  in  1828  from  England,  was  operated, 
though  without  success.  These  two  roads  were,  how- 
ever, not  in  the  strictest  sense  railways;  they  were 
only  mountain  lines  operated  by  gravity  and  station- 


1 82  Railway  Transportation 

ary  engines,  and  they  were  used  exclusively  by  coal 
companies  for  the  movement  of  coal  from  the  moim- 
tains  to  canal  boats. 

The  honour  of  being  the  first  real  railway  belongs 
to  the  Baltimore  and  Ohio.  This  line  received  its 
charter  in  1827,  was  in  the  process  of  construction  by 
1828,  and  had  in  operation  by  1830  about  13  miles. 
It  was  to  be  a  common  carrier,  and  as  early  as  1830 
a  decision  was  made  in  favour  of  the  locomotive  as 
the  motive  power. 

The  coming  of  the  locomotive  railway  ushered  in 
the  period  of  the  "American  Industrial  Revolution." 
To  quote  President  Hadley:  "On  the  fourth  of  July, 
1828,  Charles  Carroll,  last  surviving  signer  of  the 
Declaration  of  Independence,  laid  the  first  rail  of  the 
Baltimore  and  Ohio  Railroad.  One  man's  life  formed 
the  connecting  link  between  the  political  revolution 
of  the  last  century  and  the  industrial  of  the  present. 
.  .  .  The  second  reaches  wider  and  deeper  than  the 
first." 

^his  pioneer  railway  grew  slowly;  it  had  in  opera- 
tion by  the  end  of  1835  only  135  miles.  The  Charles- 
ton-Hamburg, chartered  in  1829,  with  137  miles  in 
operation  as  early  as  1834,  held  for  a  time  the  honour 
of  being  the  longest  individual  line  in  the  world.  Of 
all  the  States,  Pennsylvania  was  the  most  active  in 
railway  building,  especially  of  coal  roads;  by  1835 
there  were  open  for  traffic  at  least  two  hundred  miles — 
about  one-fourth  of  the  entire  mileage  of  the  United 
States.  The  period  1830-40  saw  the  foundations  of 
many  small  and  disconnected  lines,  in  practically  all 
parts  of  the  country.  At  its  beginning  there  were  but 
thirty-nine  miles,  by  its  end,  2755;  and  during  this 


United  States  183 

decade  Philadelphia  was  the  centre.  The  next  ten 
years  had  an  important  expansion,  both  of  mileage 
and  efficiency  of  service,  to  8571  in  1850.  New  Eng- 
land was  now  the  most  active  section.  Her  industries 
were  more  fully  developed,  and  she  had  more  surplus 
capital.  The  Middle  States  made  some  extensions, 
the  Southern,  fewer,  and  those  of  the  Mississippi 
Valley  had  their  first  experience. 

During  the  period  from  1850  to  1857  railway  build- 
ing became  still  more  energetic,  and  by  i860  there 
was  a  mileage  of  28,919.  The  Middle  and  South 
Atlantic  sections  were  during  this  decade  the  leaders, 
though  the  Mississippi  Valley  was  active.  The  East- 
em  States  filled  in  many  of  the  gaps,  and  the  Middle 
West  constructed  some  of  its  main  lines.  Cotton  and 
slavery  did  not  absorb  all  the  energies  of  the  South 
Atlantic  region;  the  desire  of  the  West  to  connect 
itself  with  the  East  by  great  trunk  lines  was  greatly 
aided  in  its  realisation  by  the  land-grants,  which  were 
made  to  railway  construction  by  the  States  and  the 
nation.  With  this  growth  of  mileage,  went  the  pro- 
cess of  consolidation  and  combination.  In  1850  most 
of  the  lines  were  very  short,  and  practically  none  of 
them  were  connected  with  each  other.  There  were  no 
through  lines  of  any  importance  outside  of  New  Eng- 
land. By  i860  many  of  the  trunk  lines  as  they  exist 
to-day  had  been  created.  New  York  and  other 
important  centres  in  the  East  had  been  joined  by  rail 
with  Chicago.  There  were  two  notable  examples  of 
this  process  of  consolidation;  the  New  York  Central 
and  the  Pennsylvania  systems  were  both  formed 
during  this  decade. 

Some  of  the  building  of  this  decade  contained  a 


1 84  Railway  Transportation 

large  element  of  uncertainty  and  speculation,  more 
especially  in  the  Middle  West,  where  population  and 
industries  were  highly  dynamic.  The  panic  of  1857 
brought  still  greater  uncertainty  and  risk.  The 
large,  even  lavish,  grants  of  public  lands  to  railway 
building  were  discontinued,  at  least  for  a  time.  For 
these  reasons,  railway  construction  came  in  1857  to  a 
practically.'complete  standstill — a  condition  which  sub- 
stantially remained  until  the  Civil  War.  The  war 
and  the  special  industries  which  it  called  into  existence 
absorbed,  of  course,  most  of  the  energies  and  capital  of 
all  parts  of  the  country.  The  only  force  that  stimu- 
lated railway  extension  during  the  continuance  of  the 
war  and  immediately  thereafter  was  to  be  found  in 
the  policy  of  the  National  Government  to  make  grants 
from  the  public  domain,  upon  a  large,  even  vast,  scale, 
to  railway  companies.  Such  a  policy  brought  forth 
much  activity  in  the  far  West,  where  the  people  were 
eager  to  connect  the  Pacific  with  the  Mississippi ;  and 
from  1868  to  1872  there  was  much  extension  of  the 
railway  mileage,  particularly  in  the  upper  Mississippi 
Valley.  The  foundations  of  much  of  this  railway 
extension,  like  the  foundations  of  other  enterprises, 
were  during  the  period  1865-73  none  too  securely  laid. 
Political  and  business  morals  were  at  this  time,  as 
is  usual  after  a  great  war,  largely  unsound ;  the  spec- 
ulative spirit  was  rampant.  That  a  crisis  should 
come  soon,  as  come  it  did  in  1873,  was  to  be  expected, 
and  it  put  for  a  time  a  practical  end  to  railway 
building. 

By  1879,  business  had  again  adjusted  itself,  and 
there  was  expansion  everywhere.  From  this  date 
until  1884,  when  the  force  of  another  crisis  made  itself 


United  States  185 

felt  in  all  phases  of  American  economic  life,  the  rail- 
way mileage  increased  to  a  great  degree.  The  trans- 
continental lines  were  completed.  They  had  been 
chartered  early  in  the  period  of  the  national  grants, 
1862-72,  but,  with  the  exception  of  the  Central  Pacific, 
they  were  still  unfinished.  The  panic  of  1883-84, 
moreover,  did  not  leave  behind  it  a  spirit  of  stubborn 
depression,  and  expansion  in  the  railways  soon  again 
became  vigorous.  The  achievements,  as  measured  by 
the  growth  of  the  mileage,  of  the  decade  1880-90  were 
marvellous,  from  87,724  to  163,597 — an  increase  of 
75,873  miles.  This  increase  in  construction  was  to 
be  found  in  all  parts  of  a  vast  coimtry ;  it  was  notably 
important  in  the  southern,  central,  and  western  parts. 
The  South  was  arising  from  the  ruin  and  depression  of 
the  Civil  War  and  Reconstruction.  The  Centre  and 
the  West  were  witnessing  a  gigantic  growth  in  popula- 
tion and  agriculture.  Private  capital  was  greatly 
aided  by  grants  or  loans  from  the  national  and 
local  authorities. 

Since  1890  the  increase,  while,  with  the  exception  of 
the  great  depression  of  1893-96,  steadily  important, 
has  not  been  so  large;  and,  in  reasonable  probability, 
it  will  not  be  remarkable  in  the  future.  Most  of  the 
big  lines  have  been  constructed.  It  only  remains  to 
construct  the  necessary  short  branch  lines  and  improve 
the  old  ones.  The  chief  work  of  the  companies  has 
since  1890  been  in  the  improvement  of  the  old  mileage, 
much  of  which  had  been  inefficiently  built.  The 
rebuilding  of  the  lines,  by  taking  out  the  grades  and 
curves,  and  by  displacing  wooden  structures  with 
those  of  stone  and  steel,  has  been  a  tremendous  task, 
to  say  nothing  of  the  work  of  constructing  second, 


1 86  Railway  Transportation 

third,  and  fourth  trackage,  and  of  supplying  efficient 
rolling  stock. 

A  clear  vision  of  the  growth  of  the  lines  may  be  had 
in  these  mileage  figures  of  the  single  track: 

1830 39 

1840 2,755 

1850 8,571 

i860 28,919 

1870 49,168 

1880 87,724 

1890 163,597 

1900 193,345 

1909 236,868 

These  figures  make  a  remarkable  exhibit  of  ex- 
pansion. If  the  mileage  of  second,  third,  fourth,  and 
yard  tracks  were  added,  the  total  would  be  almost 
350,000.  In  1908  the  United  States  possessed  about 
two-fifths  of  the  mileage  of  the  world,  and  15% 
more  than  that  of  all  Europe;  she  had  233,677,  as 
compared  with  197,381  for  Europe,  and  595,841  for 
the  world.  The  American  railway  industry  has,  there  • 
fore,  become  tremendously  large — ^the  greatest  of  all 
industries.  Its  total  capitalisation  is  practically 
$18,000,000,000,  probably  as  much  as  one-eighth  of 
all  the  wealth  of  all  the  people  of  the  United  States. 
It  has  in  its  employ  over  1,500,000,  largely  men,  to 
whom  it  pays  in  a  single  year  wages  amounting  to 
above  a  billion  dollars.  The  enterprises  which  manu- 
facture and  trade  in  railway  supplies  and  equipment, 
and  whose  prosperity  is  fundamentally  dependent 
upon  the  business  of  the  railways,  employ  perhaps  as 
many  as  1,500,000. 


United  States  187 

This  mileage  is  owned  by  approximately  2500 
different  companies,  and  operated  by  about  1000. 
While  as  many  as  1000  different  companies  operate 
the  lines,  the  management  of  the  larger  part  of  the 
mileage  has  gradually  formed  itself  into  certain  well- 
marked  groups  of  territory:  (i)  The  New  England, 
which  was  the  first  group  to  form,  with  Boston  as  the 
centre,  and  which  has  long  had  more  uniform  condi- 
tions of  traffic  than  prevail  elsewhere  in  the  United 
States;  (2)  the  Trunk  Line  Territory,  which  extends 
from  the  eastern  seaboard  to  the  Mississippi  River, 
as  far  south  as  the  James  and  the  Ohio,  with  New 
York,  Philadelphia,  Chicago,  and  St.  Louis  as  its 
centres;  here  the  Vanderbilt  and  Pennsylvania  sys- 
tems dominate;  (3)  the  Southern,  where  the  Morgan 
interests — the  Southern  Railway,  etc. — have  the  chief 
control;  (4)  the  Granger  and  North-West  Territory, 
which  extends  from  Chicago  and  St.  Louis  westward 
and  northward,  with  these  two  centres  as  the  domi- 
nating forces;  here  the  Hill  interests,  in  the  Chicago, 
Burlington,  and  Quincy,  and  the  Great  Northern  and 
Northern  Pacific,  play  the  largest  r61e;  (5)  the  South- 
West  Region,  where  the  Harriman-Gould  interests  lead. 
The  grouping  as  to  ownership  and  control  has,  to  be 
sure,  varied,  but  that  of  traffic  conditions  has  remained 
substantially  the  same  for  a  good  many  years.  There 
have  been  many  thousands  of  owners  of  the  capital  of 
each  of  these  groups,  but  the  controlling  personalities 
have  for  a  few  years  been  those  who  hold  large  stock 
in  the  systems  known  as  the  Vanderbilt,  the  Pennsyl- 
vania, the  Morgan,  the  Hill,  the  Harriman,  the  Gould, 
and  the  Moore.  These  interests  have  come  to  control 
as  much  as  two-thirds  of  the  great  total  mileage. 


1 88  Railway  Transportation 

The  capitalisation  of  the  lines  of  the  United  States, 
though  oftentimes  said  to  contain  a  large  amount  of 
water,  has  been  small  as  compared  with  that  of  most 
other  nations.  The  fact  that  the  roadway  has  been 
for  the  larger  part  given  to  the  companies,  either  by 
citizens  or  the  various  forms  of  the  government,  has 
meant  a  smaller  cost  of  building;  and  the  roadway  is 
much  less  expensive  in  a  new  and  thinly  settled  coun- 
try, even  though  it  must  be  purchased.  The  building 
has  in  many,  in  fact  in  most,  instances  been  done 
as  cheaply  as  possible,  largely  for  present  needs 
only.  There  have  been  many  heavy  grades  and 
curves  left  in  the  roadway,  and  the  stations  and 
bridges  have  often  been  inefficiently  cheap.  The 
people  of  the  United  States  have  constructed  their 
railways,  as  they  have  most  of  their  dwellings 
and  storehouses,  for  the  minimum  of  outlay.  In 
the  older  and  more  thickly  settled  countries,  as, 
for  instance.  Great  Britain,  the  building  has  from 
the  beginning  been  done  with  greater  care  for 
the  future.  All  these  facts  explain  in  part  the 
comparatively  small  capitalisation  of  the  lines  of 
the  United  States. 

The  size  of  their  capitalisation  and  the  changes  in 
it  may  best  be  seen  in  the  per  mileage  figures  of 
representative  years: 

1880 $57477 

1890 58,659 

1900 61 ,490 

1905 65,926 

1907 70,705 

1909 74,289 


United  States  189 

It  is  seen  that  the  increase  has  for  practically  thirty 
years  been  very  gradual,  with  the  exception  of  the 
period  since  1905.  That  there  should  have  been  an 
increase,  was  to  be  expected.  There  has  been  a  rise 
in  the  price  of  many  things,  notably  of  land;  and  the 
building  has  been  done  with  much  greater  thorough- 
ness as  the  years  have  passed.  The  work  of  improving 
the  old  lines,  much  of  which  has  in  recent  years  been 
done,  has  been  expensive.  The  building  of  a  very  con- 
siderable mileage  of  second,  third,  and  fourth  tracks, 
and  the  enlargement  of  the  equipment  per  mile,  have 
necessitated  an  increase  in  the  capitalisation.  The 
important  increases,  which  came  during  the  latter 
part  of  the  period  under  consideration,  were  due  to 
these  causes,  not  to  any  great  amount  of  "stock- 
watering." 

The  relative  smallness  of  the  American  capital  per 
mile  is  clearly  shown  by  the  following  approximate 
figures  for  the  year  1907: 

^  All  Europe $121,500 

All  other  lands 66,500 

<       United  Kingdom 273,000 

England  (alone) 313,000 

France 137,200 

Italy 127,000 

Germany 109,000 

United  States 70,705 

The  cost  of  construction  and  equipment  has,  there- 1 
fore,  been  relatively  small.     Has  that  of  operation  \ 
also  been  comparatively  slight?     The  most  accurate 
answer  that  can  be  made  is  found  in  the  coefficients  of 


190  Railway  Transportation 

operation — the  ratios  of  operating  expenses  to  oper- 
ating income — ,  which  we  here  present: 

1880 60.78% 

1890 65.80% 

1900 64.65% 

1905 66.78% 

1906 66.08% 

1907 67.53% 

1909 66.16% 

If  we  take  the  year  1906  as  a  fairly  adequate 
standard  of  comparison,  we  find  that  the  United 
Kingdom  had  62%,  Germany  65%,  France  53%,  and 
Italy,  75%.  The  cost  of  operation  for  the  lines  of  the 
United  States  has  upon  an  average  been  higher  than 
that  in  Great  Britain  or  France,  but  not  materially 
different  from  that  in  Germany.  The  coefficient  in 
Germany  was  as  low  as  54.8%  in  1895,  and  as  high  as 
74.62%  in  1908,  with  68.99%  in  1909.     The  wages  of 

.American  employees  have  been  substantially  higher 

^than  anywhere  in  Europe. 

With  the  condition  of  comparatively  small  capital- 
isation and  not  very  high  cost  of  operation,  we  should, 
under  normal  conditions  of  traffic,  expect  to  find  fair 
dividends.  The  conditions  of  the  traffic  of  such  a 
vast  net  have,  however,  not  as  yet  been  particularly 
favourable,  and  consequently  dividends  have  not  upon 
the  lines  as  a  whole  been  high.  What  these  were 
prior  to  1887,  we  have  not  been  able  to  ascertain;  the 
facts  of  railway  operation,  which  was  till  then  under 
the  control  of  the  States,  not  the  nation,  were  not 
adequately  collected.     The  average  rate  of  dividend 


United  States 


191 


upon  all  the  stock  was  1.95%  in  1889,  1.65%  in  1895, 
2.67%  in  1901,  3.57%  in  1905.  A  considerable  por- 
tion of  all  the  stock  did  not,  however,  receive  dividends, 
as  may  be  seen  from  the  following  figures,  which  are 
relatively  typical : 


Percentage  of  stock  receiving 
dividends. 


1888 

1895 
1900 

1905 
1907 
1908 
1909 


38.56%  (of  all  the  stock) 

29-94%  "  " 

45.66%  "  " 

62.84%  " 

67.27%  "  " 

65.69%  "  " 

64.01%  " 


Percentage 

received  upon 

this  stock. 


5-38%  (average) 

5-74% 

5-23% 

578% 

6.23% 

8.07% 

6.53% 


If  we  compare  the  average  dividends  paid  upon  all 
the  stock  of  the  railways  of  the  United  States,  we  find 
that  the  American  lines  have  made  relatively  small 
net  profits  for  their  share-holders.  The  Mediter- 
ranean Company,  in  Italy,  paid  during  1 885-1 901  an 
average  of  5.15%  and  for  the  next  four  years,  3.3%, 
while  the  Adriatic  paid  6.53%  and  6%.  The  big 
companies  in  France  paid  during  1 885-1 908  practi- 
cally 4%,  while  in  Great  Britain  the  average  was 
slightly  under  4%.  These  three  countries  had,  more- 
over, a  much  larger  per  mile  capitalisation  than 
the  United  States.  In  Prussia  the  dividends  made 
during  1881-95  an  average  of  5.35%,  and  for  1897- 
1906,  7%,  but  from  these  must  be  deducted  the  inter- 
est on  the  railway  debt,  of  approximately  3%.     The 


192  Railway  Transportation 

net  dividends  on  the  Prussian  state  lines  were,  there- 
fore, for  the  period  1 889-1 905  only  slightly  higher 
than  those  on  the  lines  of  the  entire  United  States. 
The  Prussian  capitalisation  was,  however,  consider- 
ably larger. 

Some  explanation  of  the  comparative  smallness 
of  the  American  dividends  may  be  found  in  the  vast- 
ness  of  the  territory  over  which  the  companies  must 
operate  and  in  the  slight  density  of  population  and 
industries.  The  people  of  the  United  States  have 
come  to  possess  a  great  mileage,  but  their  immense 
area  demands  a  large  net.  Their  mileage  of  railway 
per  each  unit  of  one  hundred  square  miles  of  territory 
has  been:  2.96  in  1880,  5.51  in  1890,  6.51  in  1900,  7.87 
in  1908,  and  7.98  in  1909.  Certain  parts  of  their  area 
have  a  very  large  mileage,  as,  for  instance.  New  Jersey 
with  about  thirty,  Massachusetts,  twenty-six,  and 
Pennsylvania,  twenty-five;  and  their  whole  domain 
has  a  larger  mileage  than  that  of  all  Europe  together, 
which  is  approximately  5.2.  As  a  whole  the  United 
States  has,  however,  only  a  slight  mileage  in  propor- 
tion to  territory — 7.87  in  1908,  with  25.6  in  Belgium, 
19  in  the  United  Kingdom,  17  in  Germany,  14.3  in 
France,  and  9.3  in  Italy. 

Upon  the  other  basis  of  measurement — that  of 
mileage  of  railways  per  each  unit  of  10,000  population 
— ,  the  United  States  makes  a  different  exhibit.  The 
growth  of  railways  has  upon  this  basis  been:  17.51  in 
1880,  26.05  ill  1890,  25.44  ill  1900,  27.04  in  1908,  and 
27.01  in  1909.  Europe  as  a  whole  had  in  1907- 
08  only  4.6,  with  5.6  for  Great  Britain,  5.6  for 
Germany,  7.6  for  France,  3.2  for  Italy,  and  3.9  for 
Belgium. 


United  States  193 

(b)  Speculation 

The  construction  of  such  an  enormous  mileage  has, 
however,  been  attended  by  many  uncertainties  and 
risks;  and  risks  always  afford  vast  opportunities  for 
speculation,  even  manipulation.  The  growth  of  the 
population  has  been  unparalleled,  but  there  have  been 
much  unevenness  in  its  annual  increase  and  many 
disturbances  in  its  adjustment.  The  productive  power 
of  such  a  people  at  work  upon  such  a  vast  and  varied 
domain  has,  of  course,  been  large,  though  rarely 
constant.  Their  wants  and  tastes  have  likewise  been 
upon  a  great  scale,  but  highly  changeable,  if  not  indeed 
capricious.  That  the  railways  should  grow  spasmodi- 
cally, and  that  their  earnings  should  be  highly  fluctu- 
ating was,  therefore,  to  be  expected.  The  stimulus 
arising  from  the  grants  of  land  by  the  States  and  the 
nation  has,  moreover,  been  an  element  of  uncertainty, 
and  consequently  of  speculation.  Under  the  influence 
of  these  grants,  much  mileage  was  built  in  sections 
which  could  not  for  many  years  make  its  operation 
profitable,  even  if  self-sustaining. 

During  the  more  prosperous  periods,  the  American 
railways  have  generally  been  able  to  pay  the  interest 
on  the  bonds,  as  well  as  the  expense  of  maintenance 
and  operation,  and  to  make  some  returns  to  the  share- 
holders. They  have,  on  the  other  hand,  suffered 
tremendously  when  periods  of  depression  and  fright 
have  come.  Then  the  least  fortunately  located  and 
least  efficiently  managed  have  not  been  able  to  meet 
their  compulsory  obligations  in  the  form  of  interest 
on  their  bonded  indebtedness.  The  courts  have  then, 
of  necessity,  come  to  the  protection  of  the  bond- 
13 


194;  Railway  Transportation 

holders,  and  to  the  temporary  reUef  of  the  stock- 
holders, and  have  placed  the  operation  of  such  lines, 
for  a  time,  in  receivership.  There  have  been  in  the 
history  of  the  railways  of  the  United  States  three 
notable  periods  of  depression  and  inability  to  meet 
obligations,  when  the  mileage  under  receiverships  was 
large:  1873-78,  1885-87,  1893-97.  During  the  eigh- 
teen months  which  came  to  a  close  on  July  i,  1894, 
almost  one-fourth  of  the  entire  mileage  was  in  the 
hands  of  the  courts.  During  the  period  1876-1910 
129,233  was  the  mileage  placed  in  receivership  by  the 
courts. 

The  frequency  and  extent  of  receiverships  have  in  a 
large  measure  indicated  the  prevalence  of  the  specula- 
tive element  in  the  railway  construction  and  operation ; 
and  the  existence  of  receiverships  has  greatly  stimu- 
lated the  purchase  of  railway  stocks  for  speculative 
purposes.  Such  trading  has  since  the  panic  of  1883 
been  on  a  very  large  scale.  During  the  decade  ending 
with  1893  the  total  yearly  sale  of  stocks  was  never 
below  75,000,000,  and  it  ranged  as  high  as  100,000,000. 
A  part  of  this  was,  to  be  sure,  purchased  for  permanent 
holding,  by  those  who  desired  to  form  large  systems, 
but  a  very  considerable  portion  was  bought  solely  for 
speculation.  The  large  figures  for  1883-93  were, 
however,  small  as  compared  with  those  of  the  annual 
sale  of  shares  during  the  five  years,  1904-08,  when 
trading  in  the  Union  Pacific,  and  Southern  Pacific, 
and  the  Reading,  etc.,  reached  the  great  sum  of  nearly 
280,000,000  shares.  These  gigantic  sales  during  the 
first  decade  of  the  new  century,  at  a  time  when  rail- 
way construction  and  operation  were  comparatively 
stable,  were  made  in  large  part  to  those  who  were 


United  States  195 

putting  forth  tremendous  efforts  to  create  new  sys- 
tems. Now  since  most  of  the  great  systems  have 
already  been  formed,  and  since  the  power  of  the 
national  control  has  been  wonderfully  strengthened 
by  the  revisions  of  the  Interstate  Commerce  Act,  in 
1906  and  1 910,  we  have  every  reason  to  think  that 
the  speculative  purchase  of  railway  shares,  or  the 
purchase  for  the  purpose  of  still  wider  consolidation, 
has  finally  reached  the  point  of  comparatively  slight 
significance. 

Speculation  in  the  railway  business  has  in  some 
form  been  fundamentally  necessary.  Railway  trans- 
portation is  peculiarly  subject  to  fluctuations  in  its 
traffic  and  earnings ;  its  activity  and  prosperity  are  so 
intricately  bound  up  in  those  of  all  the  phases  of  the 
economic  life  of  a  people,  that  its  returns  are  neces- 
sarily uncertain.  It  must  have  a  large  permanent 
investment,  the  returns  of  which  may  or  may  not  pay 
its  obligations.  In  a  country  whose  economic  life  has 
been  so  highly  djoiamic  as  that  of  the  United  States, 
the  element  of  uncertainty  has,  of  course,  been  all  the 
more  prevalent.  For  such  a  country,  speculation, 
when  it  is  compelled  by  law  to  assume  full  responsi- 
bility for  all  its  acts,  renders  excellent  service;  it  bears 
the  burdens  of  the  risks  and,  therefore,  causes  the 
business  to  be  more  stable. 

There  has,  to  be  sure,  been  much  unresponsible 
speculation  in  the  shares  of  the  American  railways. 
Such  speculation  is  nowhere  defensible.  There  has 
also  been  much  manipulation,  by  the  "insiders,"  as 
well  as  the  "outsiders. "  Manipulation  is  everywhere 
wrong.  Practically  all  the  blame  has  been  laid  upon 
the  railway  management,  while,  in  fact,  much  of  it 


196  Railway  Transportation 

should  be  placed  upon  the  Government.  The  States 
in  granting  charters  to  railway  companies  have  for 
the  most  part  exercised  little  care  over  the  matter 
of  speculation  or  manipulation;  they  have  not  been 
regulated  or  prohibited  by  the  general  laws.  The 
American  States,  unlike  the  French  Government,  have 
acted  upon  the  theory  that  competition  in  railway 
transportation  makes  all  things  well;  and  such  a 
theory  is  to  blame  for  many  of  the  worst  evils  which 
have  existed  in  the  railway  management  of  the 
United  States. 

For  References,  see  Chapter  XVI. 


CHAPTER  XIII 

RAILWAY    TRANSPORTATION    IN    THE    UNITED    STATES 

(Continued) 

THE  policy  of  the  people  of  the  United  States  has 
been,  in  the  main,  to  build  railways  through 
private  enterprise.  In  this  respect  their  railways 
have  had  an  experience  similar  to  that  of  the  British. 
The  States  have  made  grants  to  private  companies  of 
the  right  of  way;  and  these  have  been  freely,  lavishly, 
and  even  carelessly,  made.  The  roadway  has  often- 
times been  given  by  citizens,  municipalities,  or  coun- 
ties— a  gift  never  made  to  any  of  the  British 
companies.  In  addition  to  these  gifts,  the  States 
and  the  nation  have  rendered  very  substantial  aid  in 
the  construction  of  the  lines.  State  assistance  has 
been  very  frequent  and  important;  state  operation 
has  been  only  occasional  and  insignificant. 

(a)  State  Aid 

Aid  from  the  State  came  soon  after  the  introduction 
of  the  railway.  This  became  a  notable  feature  before 
the  first  decade  of  the  railway  in  the  United  States  had 
come  to  its  end.  The  States  had  since  1814  made 
grants  of  aid  to  the  turnpike  and  canal  companies,  as 
well  as  to  banks.    That  they  should  do  this  for  the 

197 


198  Railway  Transportation 

railway,  was  the  thing  to  be  expected.  The  policy 
and  spirit  of  State  assistance  received  great  stimulus 
from  the  decision  of  the  National  Government,  made  in 
1837,  to  distribute  to  the  various  States  the  funds 
which  it  held  as  a  surplus,  and  which  had  accrued  from 
the  sale  of  parts  of  its  pubHc  domain.  The  coming 
of  these  gifts  from  the  nation  added  to  the  zeal  of  the 
State  administrations  to  render  assistance  to  internal 
improvements  in  general  and  to  the  railways  in 
particular. 

Much  of  this  State  aid  was,  however,  bestowed 
without  clear  intelligence  or  care.  In  numerous 
instances  it  was  granted  to  lines  which  could  not  for 
many  years  at  least  pay  their  maintenance  and 
expenses  of  operation,  to  say  nothing  of  their  compul- 
sory obligations  in  interest  on  their  bonds.  The 
public  officials  had  too  long  been  schooled  in  a  false 
theory  of  credit  and  banks,  to  imderstand  at  all 
clearly  the  proper  relations  of  the  State  to  the  finances 
of  a  railway.  For  a  generation  at  least  they  had 
created  banking  institutions,  much  of  the  stock  of 
which  the  State  had  taken  in  exchange  for  the  charter 
right  to  do  a  banking  business,  and  little  cash  had  been 
paid  by  the  private  holders  for  their  shares.  For  the 
State  to  grant  its  credit  to  a  railway  was,  therefore, 
a  very  easy  thing;  and,  when  it  came  to  possess  as  a 
gift  a  considerable  amount  of  cash.  State  aid  became 
a  lavish  thing. 

The  States  had  also  in  a  nvunber  of  cases  public 
lands  to  grant  to  the  companies — other  gifts  to  the 
States  from  the  nation.  As  early  as  1836  propositions 
had  been  made  for  the  nation  to  make  large  contribu- 
tions to  railway  construction,  indirectly  through  the 


United  States  199 

State  administrations,  but  it  was  not  until  1850-51 
that  these  materialised.  Congress  now  made  a  grant 
of  almost  4,000,000  acres  to  the  States  of  Illinois, 
Alabama,  and  Mississippi,  for  the  specific  purpose  of 
aiding  the  building  of  the  famous  Illinois  Central  and 
the  Mobile  and  Ohio.  The  Gulf  cities  must  be 
joined  to  Chicago  by  a  trunk  rail,  and  Congress  was 
ready  enough  to  render  the  assistance  necessary  to 
secure  such  a  result,  though  it  should  be  done,  accord- 
ing to  the  then  prevailing  theory,  through  the  States. 
This  grant  allowed  the  railway  six  square  miles  of 
territory  for  each  mile  of  railway  constructed.  A 
strip  twelve  miles  wide,  one- half  on  each  side  of  the 
road-bed,  was  set  apart  from  the  public  domain;  the 
company  could  have  at  the  maximum  one-half  of  this 
strip,  and  the  remainder  could  not  be  sold  for  a  price 
less  than  $2.50  per  acre — a  scheme  for  enhancing  the 
value  of  the  public  land,  as  well  as  to  assist  the 
construction  of  the  railway.  When  once  adopted  by 
Congress,  this  policy  of  the  nation  making  grants 
from  the  public  domain  indirectly  through  the  States 
became  the  general  rule,  and  between  the  middle  of 
the  century  and  1871  practically  seventy-five  other 
similar  grants  were  made. 

Aid  from  the  States  usually  came  only  in  those 
sections  where  the  industries  were  in  a  backward 
condition,  and  where  private  capital  was  neither 
abundant  nor  eager  to  invest  in  uncertain  fields.  It 
came  partictdarly  in  the  West  and  the  South;  in  New 
England,  only  one  State — Massachusetts — gave  assis- 
tance to  the  construction  of  lines.  There  were  in  all 
practically  twenty  States  that  gave  aid  in  some  form. 
In  a  number  of   States,  notably   Illinois,   Indiana, 


200  Railway  Transportation 

Michigan,  Georgia,  Tennessee,  North  Carolina,  South 
Carolina,  etc.,  comparatively  large  public  debts  were 
incurred  for  this  purpose. 

The  National  Government  also  contributed  aid  to 
the  companies.  The  first  grant  was  made  by  Congress 
in  1862,  for  the  purpose  of  assisting  in  the  building  of  a 
line  from  the  West  to  the  Pacific  coast.  The  Civil 
War  had  clearly  demonstrated  the  political  necessity  of 
such  a  line,  and  its  economic  results  would  become 
significant  with  the  years.  To  the  Union  Pacific, 
which  built  the  line  from  Omaha  to  Ogden,  12,000,000 
acres  were  offered;  to  the  Central  Pacific,  which  built 
from  Sacramento  to  Ogden,  8,000,000;  to  the  other 
companies  which  had  a  part  in  the  construction  of  the 
first  great  transcontinental  line,  practically  13,000,000 
— ^making  a  grand  total  of  almost  33,000,000  acres  for 
the  first  line  that  crossed  the  Plains  and  the  Rockies 
to  the  Pacific.  Nor  was  this  all.  The  Northern 
Pacific  was  to  have  nearly  46,000,000  acres;  and  to  a 
number  of  other  companies  large  areas  were  granted. 
The  process  of  Congressional  grants  from  the  public 
domains  continued  until  1871.  The  total  grants 
made  by  the  National  Government,  indirectly  through 
the  States,  1850-62,  directly,  1862-71,  constituted  the 
vast  area  of  almost  160,000,000  acres — a  territory  as 
large  as  that  of  a  number  of  the  average  sized  States 
together. 

The  grants  made  directly  to  the  companies  were 
much  larger  than  those  through  the  States.  The  cost 
of  the  construction  of  lines  across  the  mountains  was 
much  greater  than  in  the  Mississippi  Valley,  and  the 
lands  in  the  national  domains  which  were  outside  of 
the  States  were  generally  much  less  valuable  than 


United  States  201 

those  granted  to  the  Illinois  Central.  The  direct 
grants  were  usually  after  the  method  of  those  made 
through  the  States — of  six  square  miles  of  land  for  each 
mile  of  line  built,  with  an  equal  amount  of  land  re- 
served for  sale  at  a  minimum  price  of  $2.50  per  acre. 
In  a  few  cases,  especially  in  the  grants  to  the  compan- 
ies which  constructed  the  first  line  to  the  Pacific,  the 
amovmt  of  land  per  mile  of  line  was  greater — as  much  as 
ten  square  miles. 

Not  all  of  this  vast  area  finally  came  into  the  owner- 
ship of  the  companies.  A  part  of  it  reverted  to  the 
Government.  The  grant  was,  of  course,  conditioned 
upon  the  actual  completion  of  a  certain  minimtmi 
mileage.  A  time  limit  was  fixed  within  which  the 
work  must  be  done.  Unless  Congress  should  extend 
this  limit,  all  the  land  in  excess  of  the  amount  to  which 
the  company  was  entitled,  in  proportion  to  its  com- 
pleted mileage,  should  revert  to  the  nation;  it  should 
really  remain  in  its  possession,  since  no  section  was 
actually  transferred  to  the  ownership  of  the  company 
until  a  mile  of  railway  had  been  constructed.  Of  the 
large  amount  conditionally  granted,  practically  iio,- 
000,000  acres  have  passed  into  the  possession  of  the 
companies,  and  they  will  perhaps  come  into  the  owner- 
ship of  more.  As  early  as  1871  attempts  were  made 
in  Congress  toward  the  forfeiture  of  large  amounts 
of  the  grants,  but  nothing  was  done  until  1890.  Now 
a  law  was  passed,  which  declared  forfeited  all  the 
lands  in  excess  of  the  amount  to  which  the  companies 
were  entitled  on  the  basis  of  the  mileage  of  their  com- 
pleted lines;  and  all  the  claims  which  have  been  made 
since  1890  have  been  for  the  mileage  already  con- 
structed when  the  law  of  forfeiture  went  into  effect. 


202  Railway  Transportation 

The  National  Government  granted  aid  to  railway 
building  in  still  another  form.  In  a  number  of  in- 
stances, especially  in  the  case  of  the  companies  which 
built  the  first  line  to  the  Pacific,  a  virtual  money  grant 
was  made.  These  companies  were,  by  the  laws  of 
1862  and  1864,  given  the  right  to  sell  United  States 
thirty-year  6%  bonds,  to  secure  a  part  of  the  con- 
struction capital.  They  could  after  the  completion  of 
a  certain  minimum  mileage  receive  a  certain  amount 
of  these  bonds  per  mile;  the  amount,  depending  upon 
the  difficulties  of  construction,  was  different  for  dif- 
ferent sections  of  the  line.  $64,623 ,5 1 2  of  these  bonds 
were  in  all  advanced  to  the  companies  which  con- 
structed the  first  line  to  the  Pacific.  These  were 
only  advanced  to  the  companies,  and  they  were 
covered  by  a  second  mortgage  upon  their  property. 
By  1899  the  larger  part  had  been  repaid  with 
interest. 

The  aid  which  the  nation  has  contributed  to  the 
construction  of  railways  in  the  West,  the  far  West, 
and  the  Pacific  coast  region  has,  therefore,  been  tre- 
mendously large.  It,  however,  looks  larger  as  we  see 
it  from  the  point  of  view  of  to-day  than  it  really  was 
to  those  who  voted  it  between  1850  and  1871.  It  now 
seems  enormously  extravagant.  It  then  appeared  as 
a  comparatively  small  consideration.  Such  action  on 
the  part  of  Congress  brought  transcontinental  trans- 
portation a  good  many  years  earlier  than  it  would  have] 
come  without  its  aid;  it  brought  the  condition  of 
united  country  and  of  a  wonderfully  prosperous  people  j 
even  though  at  great  public  cost,  perhaps  a  quarter  o^ 
a  century  earlier.  Is  not  such  a  result  enormous!] 
valuable? 


United  States  203 

(6)  Competition  and  Combination 

The  railway  had  from  the  beginning  a  peculiar 
right  and  privilege — that  of  eminent  domain,  to  force 
the  sale  of  property  for  its  roadway.  Apart  from 
this  peculiarity,  the  railway  business  was  for  a  number 
of  years  in  the  United  States,  as  in  Great  Britain, 
regarded  as  entirely  ordinary.  It  was  assumed  to  be, 
like  any  other  branch  of  business  enterprise,  a  thing 
which  competition  could  efficiently  regulate.  It  was 
thought  that  the  charges  of  railway  service,  like  other 
prices,  would  be  satisfactorily  reduced  by  the  force  of 
competition  downward  to  the  point  of  the  cost  of  its 
making,  and  that,  whenever  this  charge  became  less 
than  its  cost,  the  service  woidd  proportionately 
decrease. 

Such  an  assumption  has,  however,  long  since  proven 
itself  incorrect.  The  railway  business  is  not  essen- 
tially competitive.  It  is,  from  its  very  nature,  and 
from  the  fact  that  it  necessarily  requires  a  large 
acciunulation  of  capital,  fundamentally  monopolistic. 
It  must  have  a  large  element  that  is  fixed  and  is, 
therefore,  independent  of  the  volume  of  the  traffic. 
It  must  continue  to  operate,  even  though  it  may  not 
pay  dividends.  It  must  pay  the  interest  on  its  fixed 
or  bonded  indebtedness  and  maintain  the  plant — a 
large  expense — ,  whatever  the  condition  of  its  traffic. 
The  fact  of  the  existence  of  a  rival  line  does  not  change 
its  fundamental  nature  or  its  obligations  to  pay  a 
certain  fixed  simi.  The  competition  may  eliminate 
the  possibility  of  dividends  upon  the  stock  of  either 
line.  It  may  even  make  it  most  difficult,  if  not  indeed 
impossible,  for  either  to  pay  the  interest  on  its  fixed 


204  Railway  Transportation 

debt  and  to  maintain  its  lines  in  a  state  of  efficiency. 
It  may  continue  for  a  time  to  move  a  traffic  that  pays 
a  rate  really  less  than  the  cost  of  its  haulage  and  the 
fixed  charges;  it  must  have  business.  Either,  or  both, 
may  become  unable  to  pay  fixed  charges  and  main- 
tenance, and  consequently  go  into  bankruptcy,  but 
this  only  makes  the  competition  more  irresponsible 
and,  therefore,  more  disastrous. 

Such  was  the  condition  of  many  of  the  lines  during 
their  days  of  active  competition,  and  such  will,  we 
think,  always  be  the  condition  of  railway  transporta- 
tion at  work  tinder  severe  rivalry.  The  results  of 
such  a  situation  were  uniformly  the  same ;  competition 
in  the  end  eliminated  itself,  and  the  rivals  combined. 
The  form  of  the  combination  was  different,  but  the 
results  were  substantially  the  same. 

The  process  of  consolidation  had  been  at  work  a 
nimiber  of  years  before  competition  became  at  all 
active  or  vigorous.  From  1850  this  process  had 
transformed  many  short  and  disconnected  lines  into 
larger  and  still  larger  systems  of  lines.  Prior  to  this 
date  the  companies  had  only  slight  capital,  and  they 
built  but  small  stretches.  Their  service  was  very 
inefficient  and  expensive.  Nominally  they  were  com- 
petitors; actually  they  could  not  compete  on  any 
important  scale.  It  was  in  fact  not  until  practically 
1870,  when  consolidation  had  achieved  a  number  of 
large  systems,  that  vigorous  competition  came  into 
play. 

Combination  of  the  railways  of  the  United  States 
has  been  along  two  directions:  (i)  the  consolidation 
of  many  independent,  and  disconnected,  and  non- 
competing  lines,  into  one  continuous  long-distance 


United  States  205 

one;  (2)  the  combination  of  competing  systems.  It 
was  in  the  first  direction  that  the  work  of  creating  the 
Vanderbilt  (the  New  York  Central  Lines),  the  Penn- 
sylvania, and  the  other  trunk  lines,  during  the  period 
1850-70,  was  carried  on.  Consolidation  of  the  small 
lines  must  be  brought  about  before  it  was  possible  to 
have  efficient  service.  No  system  possessed  a  con- 
tinuous line  of  as  much  as  four  hundred  or  five  hun- 
dred miles,  or  even  this  total  mileage,  until  after  the 
middle  of  the  century,  and  it  was  practically  twenty 
more  years  before  a  net  of  1000  miles  had  been 
formed,  and  still  twenty  more  before  the  figure  had 
grown  to  5000.  It  has  been  but  a  few  years  since 
that  it  came  to  be  so  enormously  large  as  10,000, 
1 5 ,000,  or  20,000,  and  more.  The  process  of  consolida- 
tion has,  therefore,  been  vigorously  at  work,  and  the 
results  of  its  efforts  have  everywhere  been  great  and 
advantageous.  Many  small  disconnected  lines  could 
not  perform  the  service  needed  by  an  active  people 
living  upon  such  a  vast  area.  They  had  need  of  a 
great  continuous  railway  which  could  bind  many 
different  and  far  separated  sections  into  a  continuous 
one.  The  eastern  communities  must  have  the  raw 
materials  of  the  central  and  western  parts,  and  these, 
in  turn,  must  have  better  and  cheaper  finished 
products  from  the  Atlantic  seaboard. 

The  work  of  consolidation,  however,  made  it 
possible  for  severe  competition  to  come  into  play. 
This  eastward  and  westward  traffic  was  not  yet 
sufficiently  large  or  profitable  to  enable  all  the  newly 
created  trunk  lines  to  prosper.  With  the  extension 
of  the  New  York  Central  Lines  and  the  Pennsylvania 
from  New  York  City  to  Chicago,  the  struggle  for  long- 


2o6  Railway  Transportation 

distance  traffic  began.  The  competition  which  may 
exist  between  two  small  roads  can  never  mean  very 
much ;  that  between  two  great  lines  is  always  of  large 
significance.  This  rivalry  was  soon  made  much 
more  intense  by  the  completion  of  two  more  trunk 
lines  from  New  York  to  Chicago — the  Baltimore  and 
Ohio  and  the  Erie.  The  rivalry  which  existed  between 
these  four  great  systems  for  the  movement  of  the 
eastward  and  westward  traffic  became  active  by  1855, 
but  it  was  under  substantial  control  until  practically 
1870.  Now  a  rate  war  of  the  first  magnitude  came, 
with  all  its  disastrous  results.  The  specvdative  spirit, 
which  was  so  prevalent  during  the  years  1868-73,  and 
which  constructed  a  large  mileage  of  new  lines  through 
sections  the  traffic  of  which  could  not  for  many  years 
possibly  pay  the  fixed  charges,  maintenance,  and 
operating  expense,  only  made  the  situation  more  acute. 
The  panic  of  1873  and  the  period  of  depression  which 
followed  caused,  moreover,  the  rivalry  to  become  more 
intense;  they  greatly  decreased  the  volume  of  traffic, 
for  which  the  lines  were  all  fighting. 

Such  a  rate  war  continued  until  1877,  when  all  the 
competitors  became  exhausted.  It  brought  ruin  to 
the  companies,  and  little  advantage  to  the  shippers  as 
a  whole.  To  some  shippers  it,  to  be  sure,  meant  low 
rates.  To  others,  notably  those  located  at  the  inter- 
mediate non-competitive  points,  it  brought  the  con- 
dition of  still  higher  charges  for  transportation 
service;  the  chief  burden  of  the  maintenance  and 
fixed  charges  rested  upon  these  shippers,  in  favour  of 
those  at  the  great  competitive  points.  It  was,  in 
fact,  during  these  years  of  intense  competition,  that 
abusive  discriminations  were  at  their  worst.     These 


United  States  207 

were  the  "dark  days"  of  the  history  of  the  Amer- 
ican railways. 

Such  a  situation  could  not  last  very  long,  and  it 
came  to  a  close,  as  such  situations  must  always  do,  in 
combination.  This  combination  assumed,  at  different 
times  and  in  different  places,  one  of  four  forms:  (i) 
an  agreement  to  maintain  rates  at  a  certain  minimtmi, 
and  for  each  company  to  do  whatever  business  it 
might  be  able  to  secure  at  these  rates;  (2)  a  pool  of 
the  traffic;  (3)  a  pool  of  the  territory;  (4)  a  pool  of 
the  earnings. 

The  agreements  among  the  rivals  to  maintain  rates 
were  rarely  kept.  The  desire  of  each  to  carry  more 
traffic  was  oftentimes  too  strong.  Rate  agreements 
were  effective  only  in  times  of  great  prosperity,  when 
the  traffic  was  sufficiently  large  for  all  the  competitors. 
Pools  of  the  traffic  and  its  territory  were  more  effective. 
It  was,  however,  not  infrequently  found  to  be  very 
difficult,  if  not  impossible,  to  form  such  pools;  and, 
when  this  was  the  case,  the  pool  of  the  earnings  was 
the  one  created.  The  companies  were  allowed  to  do 
as  much  business  as  they  desired  to,  and  their  com- 
bined earnings  were  divided  between  the  parties  to  the 
agreement  according  to  a  certain  percentage. 

Combination  in  the  form  of  the  pool  could,  of  course, 
work  arbitrarily,  but  so  could  competition.  Com- 
bination unquestionably  placed  in  the  hands  of  a  few 
managers  enormous  powers,  but,  in  spite  of  some 
notable  examples  to  the  contrary,  they  generally 
worked  for  the  best  development  of  their  lines,  and 
their  traffic.  The  pool,  in  any  of  its  forms,  was 
almost  from  the  beginning  opposed  by  the  people. 
The  process  of  the  consolidation  of  non-competing 


2o8  Railway  Transportation 

lines  gradually  created  opposition  in  the  minds  of  the 
public,  though  in  reality  such  a  process  was  working 
wonderfully  to  their  advantage.  The  mere  fact  that 
the  new  lines  possessed  tremendous  power  was,  as 
they  tmderstood  it,  sufficient  cause  of  opposition. 
The  combination,  by  means  of  a  pool,  of  two  or  more 
such  big  lines,  was  a  thing  still  more  strongly  opposed 
by  the  popular  mind.  Consolidation  in  no  way 
eliminated  competition;  combination  meant  little  or 
no  competition.  Competition  in  railway  transporta- 
tion, the  fetich  of  the  early  British  and  of  the  Amer- 
ican public  opinion,  must  be  maintained  at  any  cost, 
though  the  people  of  the  Continent  of  Europe  had 
abandoned  it  a  good  many  years  since  and  the  British 
had  come  slowly  to  have  slight  affection  for  it. 

By  far  the  most  successful  form  of  the  pool  was  that 
of  the  earnings.  Such  a  combination  usually  allowed 
each  of  the  companies  to  keep  in  its  treasury  about 
45%  of  its  passenger  earnings  and  50%  of  the  freight, 
while  the  remainders  were  divided  between  them.  It 
gave  freedom  to  each  to  accept  whatever  traffic  was, 
without  solicitation,  presented  to  it.  This  form  of 
combination  came  into  fairly  general  use  early  in  the 
seventies,  and,  with  one  short  intermission,  it  was 
comparatively  successful  until  the  traffic  association 
came,  in  the  eighties,  to  take  its  place. 

The  first  important  illustration  of  a  successful  one 
was,  in  1870,  in  the  case  of  the  Chicago-Omaha  pool. 
By  this  the  rival  railways,  which  were  practically  of 
the  same  length,  agreed  to  eliminate  competition  and 
to  work  in  co-operation  with  each  other.  The  success 
of  the  Chicago-Omaha  was  from  the  first  distinct ;  and 
its  example  was  widely  followed  in  other  parts  of  the 


United  States  209 

country — in  fact  in  practically  all  parts,  in  the  form  of 
a  pool  or  traffic  association.  The  Southern  Railway 
and  Steamship  Association  was  created  in  1873-75. 
This  came  later  to  cover  the  territory  east  of  the 
Mississippi  River  and  south  of  the  Ohio  and  Potomac. 
Under  such  a  pool,  all  rates  for  the  competitive  traffic 
were  determined  by  an  executive  committee.  The 
traffic  and  earnings  were  also  pooled.  The  South- 
Western  Association  came  in  1876;  and  from  1876 
to  1887  there  were  formed  the  North-Western,  the 
Western,  the  Colorado,  the  Pacific  Coast,  and  the 
Transcontinental,  associations. 

The  traffic  between  the  Central  West  and  New 
York  and  other  eastern  centres  had  the  keenest  com- 
petition of  all.  Its  pooling  was,  therefore,  by  far  the 
most  difficult  to  make  and  to  enforce.  A  pool  was 
finally,  after  four  years  of  ruinous  rate  wars,  effected 
between  the  chief  lines  of  this  territory.  An  executive 
committee  of  the  Trunk  Line  Association,  composed 
of  the  Pennsylvania,  the  New  York  Central,  the  Erie, 
and  the  Baltimore  and  Ohio,  was  created.  The  west- 
bound traffic  from  New  York  was  in  1877  apportioned 
between  these  four  lines  according  to  a  certain  per- 
centage; that  of  the  east-bound,  in  1879.  During 
this  year  a  joint  executive  committee  was  authorised 
to  supervise  the  joint  interline  traffic,  to  divide  the 
local  competitive  traffic,  and  to  establish  the  "differen- 
tial" rates  which  Philadelphia  and  Baltimore  should 
have  as  compared  with  those  of  New  York  and  Boston. 
The  task  was  so  complicated  and  difficult,  that  it  was 
never  performed  with  entire  satisfaction. 

For  a  number  of  years  before  1887,  when  Congress 
forbade  pooling,  practically  all  the  important  lines  in 


210  Railway  Transportation 

the  United  States  belonged  to  some  form  of  a  pool  or 
traffic  association.  They,  moreover,  proved  them- 
selves to  be  of  great  benefit  to  shippers  as  well  as 
carriers;  they  eliminated  ruinous  competition;  they 
maintained  more  stable  and  satisfactory  conditions  of 
traffic ;  they  did  not  prevent  an  almost  constant  decline 
in  freight  rates.  Their  evident  benefits  did  not, 
however,  save  them  from  popular  condemnation.  A 
number  of  the  legislatures  declared  them  illegal,  and 
Congress,  in  1887,  forbade  them — laws  from  which  the 
people  have  really  suffered  to  this  day.  Even  before 
the  passage  of  these  statutes,  the  courts  had  refused 
to  enforce  the  provisions  of  the  pooling  contracts,  upon 
the  assumption  that  they  restricted  trade. 

The  pool  was  now  specifically  illegal,  and  it  was 
discontinued.  Various  traffic  associations,  in  which 
pooling  was  the  principal  element,  were  also  aban- 
doned or  reorganised.  The  new  traffic  association, 
which  was  now  formed,  contained  no  provision  for 
pooling;  and  rate  wars  came  again  to  curse  the  rail- 
ways and  the  shippers.  The  newly  created  associa- 
tions had,  therefore,  excessively  great  difficulties  in 
making  themselves  effective,  particularly  during  the 
period  of  the  great  depression  of  1893-97,  when  the 
traffic  was  slight. 

Two  of  the  most  important  of  the  new  associations 
were  the  Trans-Missouri  Freight  and  the  Joint  Traffic. 
The  former  had  control  of  the  competitive  traffic  of 
eighteen  roads  operating  west  of  the  Missouri  River; 
the  latter,  that  of  thirty-two  roads  in  the  Central 
Traffic  and  Trunk  Line  territories.  The  Trans- 
Missouri  was  organised  in  1889,  and  by  1892  an  action 
was  instituted  against  it  on  the  ground  of  its  alleged 


United  States  211 

contravention  of  the  national  anti-trust  law  of  1890. 
The  Supreme  Court  of  the  United  States,  reversing 
decisions  of  the  Circuit  Court  and  the  Circuit  Court 
of  Appeals,  ruled,  in  1897,  that  the  anti-trust  law 
covered  the  railways  whenever  they  made  agreement, 
as  to  their  traffic  or  rates.  The  Trans- Missouri  thus 
became  illegal.  The  Joint  Traffic  was  finally  organ- 
ised in  1896,  and  almost  immediately  a  suit  was 
brought  against  it  upon  the  charge  of  its  violation  of 
the  Interstate  Commerce  Act  and  of  the  Sherman 
Law.  The  Supreme  Court  held,  in  1898,  that  this 
association,  as  the  Trans- Missouri,  was  in  contra- 
vention of  the  Sherman  Law,  and  was,  therefore, 
illegal. 

Since  1897  and  1898,  any  combined  action  in  the 
making  or  maintenance  of  rates  has  been  illegal.  The 
railways,  rather  than  return  to  the  old  condition  of 
disastrous  competition,  have  consolidated  and  com- 
bined more  rapidly  and  upon  a  larger  scale  than  ever 
before.  Their  combination  has  now  assumed  a  more 
permanent  form,  either  (i)  that  of  the  purchase  of 
competing  lines,  or  (2)  that  of  leasing  them,  or  (3) 
that  of  a  "community  of  interest."  "Community  of 
interest"  has  become  notably  prevalent  and  efficient. 
When  the  same  men  hold  the  controlling  stock  in  all 
the  competitive  lines,  active  competition  cannot 
influence  rates.  The  traffic  associations  have  been 
reorganised,  and  they  have  since  1898  performed  an 
important  service,  though  they  have  not  made  or 
maintained  rates.  In  law  each  railway  must  by 
itself  make  rates;  in  actual  fact,  the  traffic  officials 
of  one  line  consult  those  of  another. 

Competition    between    the    lines    has,    therefore, 


212  Railway  Transportation 

largely  disappeared,  notwithstanding  the  many  efforts 
on  the  part  of  the  States  and  the  nation  to  maintain  it 
in  its  full  vigour.  The  railways  of  the  United  States 
have  finally  come  to  the  same  status — practical  mon- 
opoly— which  the  British  had  forty  years  ago,  and 
which  the  French  had  from  the  beginning,  the  German 
and  the  Italian  after  only  a  few  years  of  experience. 
The  railway  business,  to  be  efficient,  must  be  on  a 
large  scale,  and  the  great  systems  must  work  in  the 
manner  and  after  the  spirit  of  co-operation.  The 
process  which  has  converted  thousands  of  small,  dis- 
connected, and  inefficient  lines  into  big  systems, 
whether  of  one  form  or  another,  has  been  one  of  the 
most  significant  things  in  the  history  of  railways  of 
the  United  States.  In  spite  of  one  proclamation  of 
illegality  or  another,  they  have  come  to  group  them- 
selves according  to  the  economic  divisions  of  a  vast 
and  varied  country — into  practical  monopolies.  The 
very  eagerness  of  the  public  and  the  legislator  to 
maintain  all  the  phases,  good  or  bad,  of  competition 
has  been  a  strong  factor  toward  the  complete  elimina- 
tion of  its  beneficial  elements — toward  the  condition 
of  a  complete  monopoly. 

A  monopoly  railway,  just  as  a  monopoly  in  any 
other  field  of  business,  has  the  full  power  to  fix  rates, 
so  far  as  the  producer  of  a  service  or  goods  possesses 
such  power.  The  consumer  of  the  service  is,  of  course, 
always  present,  and  the  fact  of  his  presence  means  a 
great  limitation  upon  the  absolutism  of  the  monopoly. 
The  government  should  also  be  present  in  a  general 
way,  and  its  presence  should  always  be  appreciated. 
Can  a  monopoly  producer  of  railway  service,  where  no 
state  regulation    exists,  absolutely  fix   the  price  in 


United  States  213 

spite  of  the  wishes  and  interests  of  the  consumer?  In 
the  abstract,  yes ;  in  the  concrete,  no.  The  prosperity, 
that  is  the  maximum  profits,  of  such  a  producer 
depends  upon  how  much  service  he  sells,  and  is 
calculated  by  multiplying  the  amount  of  the  sale  by 
its  price  per  unit.  The  quantity  of  service  purchased 
by  the  constmier  has,  under  practically  all,  if  not  all, 
circumstances,  more  or  less  of  elasticity;  he  buys  more 
at  a  lower  price,  less  at  a  higher.  The  far-seeing  rail- 
way manager  must  understand  this  much — that  his 
present  prosperity,  most  certainly  his  future,  is 
fundamentally  dependent  upon  the  prosperity  of  the 
constuners  of  railway  service.  He  will  reduce  his 
rates,  in  order  to  secure  more  traffic,  since  generally 
it  costs  him  less  per  unit  to  move  a  larger  volume  of 
traffic  than  a  smaller.  Our  assumption  has  left  out 
the  force  of  the  presence  of  the  government;  and  this 
should  certainly  be  strong  enough  to  make  it  impos- 
sible for  a  short-sighted  railway  manager  to  do  much 
harm  to  the  public.  The  actual  facts  of  experience  in 
Europe  and  in  the  United  States,  moreover,  prove 
that  the  restraint  of  competition  or  its  elimination  has 
not  often  meant  an  increase  in  the  rates  or  a  decrease 
in  the  efficiency  of  the  service. 

The  systems  of  the  United  States,  while  they  are 
largely  monopolistic  so  far  as  the  producer  of  railway 
service  in  a  certain  territory  is  concerned,  are  still  and 
will  long  continue  to  be  under  the  force  of  competition 
at  certain  great  strategic  centres.  They  are  also  under 
a  still  more  powerful  force — that  of  the  competition  of 
markets  with  markets.  The  fact  that  the  products 
of  many  sections  of  a  country,  yes  of  the  world,  may 
compete  in  their  sale  on  the  same  common  market 


214  Railway  Transportation 

will  always  have  a  profound  influence  upon  the  rail- 
way management.  This  competition  of  markets, 
which  is  in  the  main  never  so  excessive  as  to  become 
ruinous,  and  that  of  the  big  systems  of  railways  at 
strategic  points,  which  is  also  largely  sane,  together 
with  the  fact  that  most  of  the  monopoly  systems  are 
managed  by  far-seeing  men — all  these  facts  make  the 
American  shipper  comparatively  secure  from  mal- 
treatment on  the  part  of  the  carrier,  not  to  mention 
the  control  of  the  nation,  which  has  become  very 
efficient. 

For  References,  see  Chapter  XVI. 


CHAPTER  XIV 

RAILWAY    TRANSPORTATION    IN    THE    UNITED    STATES 

(Continued) 

THE  problems  of  traffic  strike  to  the  foundations 
of  the  economic  life  of  a  people.  Their  social 
activity,  their  natural  resources,  and  the  extent  of  the 
area  upon  which  they  live,  are  fimdamental  in  the 
traffic  of  railways. 

(a)  General  Conditions  of  Traffic 

The  railways  must  in  the  United  States  cover  a 
territory  practically  as  large  as  all  Europe,  though  its 
density  of  population  was  in  1909  only  46  as  compared 
with  107  in  Europe.  The  fact  of  the  greatness  of  the 
area  in  large  part  explains  the  relative  largeness  of  the 
train-load  in  the  United  States.  From  the  point  of 
view  of  climate  also,  the  American  traffic  is  upon  the 
whole  very  different  from  that  of  Great  Britain,  Ger- 
many, France,  or  Italy.  The  whole  range  of  cHmate, 
occupation,  and  products  is  covered  in  the  United 
States,  while  in  the  small  countries  mentioned  the 
range  and  consequently  the  variety  are  much  smaller. 
The  east,  the  west,  the  north,  and  the  south  are  all 
well  marked  and  differentiated  in  the  United  States. 

The  climate  and  the  topography  of  the  United 
States  have  meant  that  the  important  routes  of  traffic 

315 


2i6  Railway  Transportation 

should  be,  unlike  those  in  much  of  Europe,  eastward 
and  westward,  with  only  secondary  routes  northward 
and  southward.  The  hauls  have  been  long  and  over 
great  ranges  of  mountains,  those  in  Europe,  short  and 
rarely  over  the  Alps.  The  centres  of  raw  materials 
have  generally  been  far  separated  from  those  of  the 
making  of  finished  goods,  and  these  in  turn  well  dis- 
tanced from  the  places  of  their  greatest  demand.  The 
places  where  culttu^e  has  most  thoroughly  crystallised 
itself  have  usually  been  far  apart.  The  passenger 
traffic  has,  therefore,  been  comparatively  light,  that  of 
commodities,  heavy.  The  wants  and  tastes  of  the 
people  of  the  United  States  have  also  had  their 
influence  upon  the  freight  and  passenger  traffic  alike; 
the  one  has  been  more  largely  for  the  lower  and  less 
finished  products,  the  other,  relatively  much  smaller 
than  in  a  number  of  the  European  countries. 

In  the  movement  of  the  traffic  of  the  United  States, 
especially  the  freight,  water  has  played  a  r61e,  but  not 
so  important  a  one  in  recent  years  as  formerly  and 
as  in  France  and  Germany.  Water  competition  is 
in  some  sections  still  active.  In  the  South  Atlantic 
States,  the  coast-wise  sea  trafiic  has  been  and  con- 
tinues to  be  extensive  and  important.  Some  of  the 
steamers  operating  within  this  section  have  come  into 
the  ownership  of  the  railways,  but  still  the  ocean  rates 
are  for  some  commodities  the  vitally  important,  if  not 
the  controlling,  influence  in  railway  rates.  The  trans- 
continental traffic  has  also  been  profoundly  influenced 
by  the  steamers  that  operate  through  the  Suez  Canal, 
or  via  Colon,  where  transfer  is  made  to  the  Panama 
Railway.  The  inland  water  traffic  has,  on  the  other 
hand,  become  relatively  less  important  since  the  early 


United  States  217 

days  of  the  railway.  A  vast  interior  has  no  navigable 
rivers  or  canals — a  great  domain  practically  without 
waterway  transportation.  The  United  States  offers 
in  this  particvdar  a  sharp  contrast  with  France  and 
Germany.  The  continent  of  Europe  north  of  the 
Alps  is  abundantly  supplied  with  navigable  rivers, 
and  these  have  been  supplemented  by  many  miles  of 
canal. 

The  influence  of  the  inland  waterway  upon  the 
railway  may  be  seen  in  the  figures  of  their  mileage  and 
the  tonnage.  In  1906  the  railway  mileage  was  prac- 
tically 7.7  times  that  of  the  navigable  rivers  and 
canals;  the  mileage  of  the  latter  was  about  28,000. 
The  total  tonnage  of  the  railways  was  in  1904 
about  12.3  times  that  of  the  rivers  and  canals — 
1,631,374,219  for  the  railways,  132,000,000  for  the 
rivers  and  canals.  This  tonnage  did  not,  however, 
include  that  of  the  Great  Lakes,  which  was  important ; 
the  total  water-borne  trafBc  was  in  1909  about 
256,000,000  tons. 

The  competition  between  the  interior  waterways 
and  the  railways  has,  however,  been  very  slight  as 
compared  to  its  full  possibilities.  The  methods  of 
water  transportation  have  in  many  places  not  kept 
the  pace  demanded  by  efficient  service,  nor  have  its 
rates  decreased  in  proportion  to  those  of  the  railways. 
Almost  from  its  beginning  the  railway  has  offered  a 
lower  and  lower  rate  for  the  hauling  of  goods.  The 
railway  rates  have  declined  from  practically  seven 
cents  per  ton  per  mile  to  .73  cents,  while  the  water 
rates  have  decreased  only  slightly.  There  has,  more- 
over, been  another  reason  for  the  decreasing  vitality 
of  inland  water  competition;  the  railway  has  followed 


21 8  Railway  Transportation 

consistently  the  policy  of  the  purchase  of  its  rival, 
the  water  carrier,  notably  within  recent  years.  The 
control  of  the  water-borne  traffic  of  many  sections  is 
now  effectively  in  the  possession  of  the  railways.  They 
dominate  in  most  of  the  packet  lines  and  the  larger 
part  of  the  grain  ships  that  operate  upon  the  Great 
Lakes.  On  the  Pacific,  the  majority  of  the  coast- 
wise steamers  and  packets  are  in  their  hands,  and  their 
ownership  of  the  steamers  of  the  South  Atlantic  and 
the  Gulf  has  come  to  be  extensive.  A  consolidated 
coal  and  coke  company  has,  on  the  Mississippi  and 
the  Ohio,  control  of  the  movement  of  the  larger  part 
of  the  coal  traffic,  and  this  is  by  far  their  important 
traffic.  Everywhere  in  the  United  States  the  rail- 
ways have  practical  charge  of  the  water  frontage. 

(b)  Passenger  Service  and  Rates 

Density  of  population,  industrial  activity,  and  per 
capita  wealth  are  the  fundamental  forces  in  the 
passenger  traffic.  The  volume  of  this  traffic  varies,  of 
course,  with  the  various  sections.  On  the  chief  line 
between  Boston  and  New  York — the  New  York,  New 
Haven,  and  Hartford, — the  earnings  from  the  passen- 
ger service  amount  to  practically  forty-eight  per  cent. 
of  the  total  income,  while  for  the  whole  country  the 
average  for  the  steam  railways  is  approximately 
twenty-four  per  cent,  from  passenger  earnings  and 
sixty-nine  per  cent,  from  freight.  The  relative 
importance  of  the  passenger  service,  as  measured  by 
its  earnings,  has,  moreover,  changed  only  slightly 
during  the  last  thirty  years.  It  was  23.5%  in  1880, 
24.79%  in  1890,  21.77%  in  1900,  and  23.68%  in 
1908. 


United  States  219 

The  growth  of  this  traffic  has,  however,  been  signifi- 
cant, as  may  be  seen  in  the  figures  of  the  per  capita 
passenger  mileage.  This  was  1 14  in  1880,  191  in  1890, 
210  in  1900,  and  260  in  1903;  and  from  1902  to  1908 
the  increase  of  the  passenger  mileage  was  forty-seven 
per  cent.,  while  that  of  the  railway  mileage  was  but 
14.5%.  A  part  of  this  increase  in  the  passenger 
mileage  was  due  to  an  increase  in  the  average  length 
of  the  journey.  This  was  21.29  rniles  in  1880,  24.06 
in  1890,  27.8  in  1900,  and  32.86  in  1908.  From  1867 
to  1900  it  did  not  reach  the  figure  of  1867-71,  28.63 
miles.  The  increase  in  the  length  of  the  journey  has 
been  comparatively  small;  that  of  the  per  capita 
passenger  mileage  was  during  the  twenty-three  years, 
1 880-1903,  as  much  as  228%,  while  the  population 
had  an  increase  of  sixty  per  cent. 

These  figures  indicate  an  important  growth  in  the 
passenger  service,  but  it  is  still  slight  as  compared 
with  that  of  some  of  the  European  countries.  If  we 
take  the  year  1900  as  a  fair  one  for  comparison, 'we 
find  that  the  United  Kingdom  had  27  per  capita  trips, 
Germany,  12,  France,  10,  the  United  States,  6.9,  and 
Italy,  1.5.  The  United  States  stood  low,  sixth,  in 
fact,  in  the  per  capita  trips,  but  its  passenger  mileage 
in  a  year  was  second  alone  to  that  of  the  United 
Kingdom,  which  was  in  1900  about  245  as  compared 
with  220  in  the  United  States,  175  in  Germany,  and 
165  in  France. 

The  European  passenger  service  has  generally  three 
classes ;  Prussia  has  four  regular  classes  and  one  special 
for  soldiers  and  working-men.  The  United  States  has 
usually  only  one  class.  The  Pullman  car  service  is  an 
extra  in  Europe,  as  well  as  in  the  United  States.  There 


220  Railway  Transportation 

are  some  sections  of  the  country  in  which  a  second 
regular  class  exists;  in  some  parts  of  the  West  and  South 
such  a  service  is  offered,  at  a  rate  considerably  lower 
than  that  of  the  first  class.  By  far  the  larger  part  of 
the  traffic  in  the  United  States  moves  on  the  regular 
first-class  service;  in  Europe  on  the  third,  or  on  the 
third  and  fourth.  The  American  railways,  unlike  the 
European,  have  made  little  serious  effort  to  create  a 
general  regular  service  below  the  first.  The  people 
who  travel  have  for  the  most  part  looked  with  dis- 
favour upon  such  a  service.  They  have  felt  them- 
selves as  the  equal  of  any  whenever  they  have  travelled 
by  rail.  The  railways  and  the  public  have,  therefore, 
alike  worked  for  the  creation  of  a  superior  service. 
They  have,  especially  within  more  recent  years,  made 
their  efforts  toward  a  still  higher  service  than  the 
regular  first  class.  During  the  decade  ending  with 
1909  the  Pullman  service  had  a  growth  of  approxi- 
mately 210%,  while  the  increase  in  the  total  ntmiber 
of  passengers  was  only  70%. 

The  railways  of  the  United  States  have,  therefore, 
had  a  development  of  the  passenger  service  in  a 
direction  directly  opposite  to  that  of  Europe.  In 
Europe,  the  tendency  has  been,  as  we  have  seen,  more 
and  more  towards  a  cheaper  service.  The  average 
European  knows  that  he  belongs  to  an  inferior  social 
class.  He  travels  at  the  least  possible  expense.  The 
average  American  demands  in  his  railway  service 
speed,  comfort,  and  luxury,  and  when  he  travels  by 
rail  he  does  not  like  to  feel  himself  a  social  inferior. 
The  fact  of  the  longer  average  journey — and  it  in- 
creased 23%  during  1900-10 — on  the  lines  of  the 
United  States  has  its  weight.     It  is  more  than  twice 


United  States  221 

as  long  as  that  in  Germany,  almost  twice  that  in 
France. 

The  American  railways  have  estimated  that,  for 
the  benefit  of  their  maximum  net  profits,  it  is  best, 
under  the  condition  of  comparatively  slight  density 
of  passenger  traffic,  to  offer  an  excellent  service  at  a 
fairly  high  rate.  They  have,  however,  upon  the 
whole  not  charged  all  the  traffic  would  bear;  they 
have  usually  supplied  the  grade  of  service  which  the 
public  has  demanded,  and  at  a  price  that  it  would 
readily  pay.  The  whole  question  has  been  to  them 
one  of  business — of  merely  selling  a  service.  In  those 
countries  of  Europe  where  state  operation  has  domi- 
nated, other  than  purely  business  reasons  have  played 
an  important  part  in  the  supply  of  passenger  service, 
and  in  the  fixing  of  its  rates.  The  idea  of  the  adminis- 
tration's popularity  in  the  mind  of  the  masses  has  been 
an  important  one. 

That  the  rates  per  passenger  per  mile  should  not  in 
the  United  States  have  had  important  decreases,  was 
to  be  expected.  The  service  has  steadily  grown  more 
efficient,  comfortable,  and  luxurious,  and  the  rates 
have  not  to  a  great  degree  changed,  as  may  be  seen  in 
these  figures  of  representative  years: 

1867 1 .99  cents 

1872 2.52     " 

1877 2.45  " 

1880 2.51  " 

1882 2.39  " 

1888 2.34  " 

1890 2.16  " 

1895 2.04  " 


222  Railway  Transportation 

1900 2.00  cents 

1905 1.96     "    • 

1908 1.93     " 

The  rates  of  1867  were  abnormally  low.  They  were 
less  than  in  1896-97,  and  less  than  at  any  date  between 
1867  and  1897  with  the  single  exception  of  1894.  It 
has  been  only  since  1901  that  the  average  has  become 
less  than  that  of  1867.  The  decHne,  if  we  take  1872 
as  our  basis  of  comparison,  has  been  fairly  important. 

Diiring  the  period  since  1867,  the  European  rates 
have  had  very  important  reductions,  but  they  have 
come  largely  because  of  a  great  increase  in  the  use  of 
the  second-,  third-,  and  fourth-class  service;  their  first- 
and  second-class  rates  have  remained  high,  their  first 
considerably  higher  than  those  in  the  United  States. 
The  electric  railways  have,  moreover,  in  the  United 
States  tended  more  and  more  to  do  the  short  distance 
and  cheap  passenger  service,  the  larger  part  of  which 
is  done  in  Europe  by  the  steam  railways. 

To  make  the  comparison  of  American  and  European 
passenger  rates  more  exact,  let  us  present  the  figures 
of  1908  of  the  average  receipts  per  passenger  per  mile : 

United  States,    (with  i      reg.  class),  1.937  cents 

Great  Britain,        "     3       "       "  2  "  (approximately) 

France,  "     3       "       "  1.107  " 

Italy,  "     3       "       "  1.3      " 

Germany  (1907),    "     3-5    "       "  .929  " 

This  comparison  becomes  all  the  more  fair  when  it  is 
considered  in  terms  of  the  volimie  of  traffic  per  class 
of  service;  and  we  here  give  the  classification  and 
percentages  for  the  three  leading  countries  of  Europe, 
for  years  which  are  representatives: 


United  States 


223 


Prussian -Hessian 
State  (1908) 

France  (1905) 

United  Kingdom 
(1905) 


0.17% 
4.41  " 

304  " 


94  % 
24.69  " 

4-38" 


III 


43-15% 
70.90  " 

92.58  " 


IV 


46.20% 


MU. 


1.08% 


The  passenger  service  in  the  United  States,  while 
it  is  in  a  number  of  places  of  comparatively  slight 
traffic  not  particularly  efficient,  is  upon  the  whole 
excellent.  In  terms  of  speed,  comfortj  and  luxury,  it 
has,  we  think,  no  superior,  if  indeed  a  single  rival. 
J[n  its  equipment  and  in  its  station  facilities,  it  is  in 
many  respects  admirable.  It  is  in  its  fatalities,  that 
it  makes  its  least  favourable  showing  of  excellency. 

For  References,  see  Chapter  XVI. 


CHAPTER  XV 

RAILWAY  TRANSPORTATION  IN  THE  UNITED  STATES 

(Continued) 

THE  traffic  of  commodities  has  always  been  of  far 
greater  importance  to  the  railways  and  to  the 
public  than  that  of  passengers.  The  chief  problem  of 
the  railways  of  the  United  States  has,  therefore,  been 
in  the  movement  of  the  freight.  Since  1890  the 
percentage  of  earnings  from  the  freight  service  as 
compared  with  the  total  income  has  been  approxi- 
mately from  67  to  71.  It  was  67.9%  in  1890,  67.88% 
in  1895,  70.56%  in  1900,  69.67%  in  1905,  and  69.15% 
in  1908.  Prior  to  1890  its  relative  value  was  upon  an 
average  as  great  as  since  that  date. 

(a)  Freight  Service  and  Rates 

The  expansion  of  the  freight  traffic  has  been  remark- 
ably great,  as  may  be  seen  in  the  figures  of  the  per 
capita  ton  mileage.  This  was  645  in  1880,  12 17  in 
1890,  2155  in  1903 — an  increase  in  twenty- three  years 
of  334%  in  the  demand  for  freight  service,  while  during 
this  period  the  population  grew  60%. 

The  volume  of  this  traffic  is  relatively  large.  The 
railways  of  the  United  States  haul  upon  the  whole  a 
tonnage  practically  two  times  that  of  the  British,  fully 
twice  that  of  the  German,  and  from  five  to  six  times 

224 


United  States  225 

that  of  the  French.  The  total  volume  of  traffic  is 
large,  but  its  density  is  as  an  average  not  equal  to  that 
of  the  United  Kingdom  or  Germany.  The  length  of 
the  haul  is  also  great.  The  typical  haul  per  ton  upon 
all  the  railways  as  a  system  was  242.7  miles  in  1900, 
237.56  in  1905,  and  254  in  1910.  By  way  of  compari- 
son, it  is  approximately  76  in  France,  61-72  in  Ger- 
many, and  31-50  in  Great  Britain.  The  railways  of 
the  United  States  had  in  1907  a  ton  mileage  approxi- 
mately six  times  that  of  the  British,  nine  times  that  of 
the  German,  and  twenty  times  that  of  the  French; 
they  had  a  total  tonnage  of  1,641,410,776,  with  a  ton 
mileage  of  236,600,000,000. 

The  American  tonnage  has,  unlike  much  of  the 
European,  moved  in  ever-increasingly  large  trains. 
This  may  best  be  seen  in  the  average  tonnage  per 
train.  This  was  128.87  in  1880,  175. i  in  1890,270.8 
in  1900,  and  351.8  in  1908.  In  1910  nearly  two-thirds 
of  the  freight  cars  of  the  United  States  had  a  capacity 
of  from  60,000  to  80,000  poimds,  and  as  many  as  12  % 
of  100,000.  Less  than  4%  had  only  40,000.  In  no 
other  land  has  it  been  necessary  to  haul  heavy  raw 
materials  so  long  a  distance  as  in  the  United  States. 
The  centres  of  the  production  of  these  materials  have 
been  and  are  still  far  distanced  from  the  places  of  their 
manufacture — a  point  of  enormously  great  vitality. 
The  railways  have,  however,  adjusted  themselves  to 
the  situation  with  remarkable  success.  They  have 
caused  the  places  of  raw  materials,  of  manufacture, 
and  of  consumption,  to  be  brought  into  imity.  The 
greatness  of  their  tasks,  we  have  not  appreciated 
at  its  fuU  value.  It  would  have,  we  think,  been 
impossible  to  perform  them  so  well  by  a  rigidly 

IS 


ii26  Railway  Transportation 


standardised  system  of  transportation — the  system 
which  has  dominated  in  state  operation;  it  must  be 
done  by  an  administration  possessing  the  power  to  be 
elastic  and  adjustable. 

In  the  character  of  the  freight  traffic,  the  railways 
of  the  United  States  have  had  a  problem  different 
from  that  of  many  of  the  European  lines.  The 
American  products  have  been  much  more  largely  of 
the  lower  value  type  than  the  British,  German,  or 
French ;  and  too  in  Germany  and  France  very  consider- 
able portions  of  the  heavy  low  grade  traffic  have  moved 
by  water.  The  clearest  view  of  the  character  of  the 
traffic  of  the  railways  of  the  United  States  may  be  had 
in  the  grouping  which  the  Interstate  Commerce 
Commission  has  made,  and  in  the  percentage  of  each 
group  as  compared  with  the  total  tonnage,  at  three 
representative  dates : 


Agri.  Products 
Animal      " 
Mines       " 
Forest       " 
Manufactures 
Merchandise 
Miscellaneous 


1890 


13-51% 

4-13% 

42.40% 

9-96% 

12.48% 

4-65% 
12.87% 


1900 


12.73% 
3-38% 
49.88% 
10.41% 
14-10% 

4-44% 
5.06% 


1909 


8.92% 

2.49% 

55-60% 

11.75% 

13-15% 

4-11% 

3-98% 


It  will  be  noticed,  that  for  practically  two  decades 
the  percentages  have  not  materially  changed,  with  the 
exception  of  the  miscellaneous  group.  From  this 
grouping  it  becomes  clear  that  those  sections  which 
produce  the  minerals  and  the  manufactures  have 
almost  69%  of  the  traffic,  and  that  in  the  great  belts  of 
agriculture,  particularly  in  the  South  and  West,  the 


United  States  227 

traffic  is  not  at  all  dense.  The  area  in  which  exists 
68.75%  of  the  traffic  is  largely  confined  to  the  territory 
north  of  the  Potomac  and  the  Ohio  and  east  of  the 
Illinois  and  Lake  Michigan — a  section  with  only  one- 
ninth  of  the  total  area  and  more  than  two-thirds  of 
the  total  tonnage. 

These  groups  contain,  of  course,  a  large  number  of 
commodities,  which  are  published  in  two  separate 
books:  (i)  a  Classification  Book,  (2)  a  Tariff  Book. 
The  Classification  Book  does  not,  however,  cover  all 
the  items  of  traffic;  many  of  them  are  assigned 
"commodity  rates. "  During  the  year  which  came  to 
a  close  on  November  30,  1910,  there  were  filed,  at 
Washington,  with  the  Interstate  Commerce  Commis- 
sion 154,588  tariff  publications — about  30,000  less  than 
during  the  previous  year.  The  decrease  in  the  num- 
ber of  items  was  due  to  a  consistent  plan,  which  the 
railways  had  for  some  years  followed,  to  include  in  the 
"book  tariffs"  rates  upon  as  many  specific  commodi- 
ties as  possible  and  thus  to  eliminate  as  many  of  the 
miscellaneous  tariffs  as  practicable. 

The  process  of  making  the  maximtun  number  of 
"book  tariffs "  has  been  steadily  at  work ;  the  tendency 
toward  greater  uniformity  has  been  constantly  strong 
since  the  early  eighties.  Prior  to  that  time,  the 
classification  was  not  definite,  though  it  was  very 
slowly  becoming  so.  The  process  of  the  consolidation 
of  many  small  lines  into  greater  and  greater  ones  had  a 
profound  influence  toward  imiformity  of  classification. 
The  demand  for  through  shipment  meant  an  increase 
in  the  number  of  interline  rates.  The  greatest  force 
toward  vmiformity  has,  however,  been  in  the  power 
of  the  Interstate  Commerce  Commission.  There  came 


228  Railway  Transportation 

almost  at  once  after  its  creation,  in  1887,  a  more  defi- 
nite and  uniform  classification  in  the  Trunk  Line 
territory — a  classification  known  as  the  "OflScial." 
By  1889  the  "Southern"  and  the  "Western"  were 
definitely  formed.  The  work  of  making  these  was, 
of  course,  a  large  one,  and  it  was  done  by  the  represen- 
tatives of  the  railways.  There  were  540  lines  that 
took  part  in  the  formation  of  the  "Official, "  480  in  the 
"Western,"  and  170  in  the  "Southern." 

These  three  classifications  do  not  include  the  purely 
local  traffic,  and  they  do  not  cover  all  of  the  United 
States.  They  apply,  however,  to  the  larger  part  of 
the  traffic.  The  process  has  now  almost  achieved  a 
system  of  imiformity  for  the  whole  country.  A  central 
committee  has  for  more  than  three  years  been  labour- 
ing to  make  it  more  complete.  The  revisions  of  the 
Interstate  Commerce  Act  of  1906  and  1910  will  add 
to  the  movement,  since  they  require  through  routes 
and  rates.  The  task  has  of  necessity  been  so  large 
and  complicated,  that  it  cotdd  not  be  performed  in  a 
short  time  or  by  a  mechanical  or  routine  method.  The 
three  important  classifications,  though  they  do  not 
include  all  the  traffic  or  territory,  contain  practically 
22,000  entries.  They  must,  moreover,  have  frequent 
modifications;  American  economic  conditions  have 
been  and  are  highly  d3mamic.  The  ' '  Official ' '  and  the 
"Southern"  have  had  nearly  forty  editions,  and  the 
"Western,"  practically  twenty-five. 

In  these  classifications,  the  commodities  of  most 
value  have  been  put  in  the  highest  groups.  Value 
has,  however,  not  been  the  sole  factor  in  the  American 
classification,  though  it  has,  according  to  a  ruling  of 
the  Interstate  Commerce  Commission,  been  the  con- 


United  States  229 

trolling  one.  Cost  of  service  has  frequently  played  an 
important  rdle ;  and  the  commission  has  accepted  this 
principle  as  correct  when  supplementary  to  the  value 
of  the  service  or  of  the  goods.  The  element  of  risk 
has  also,  of  course,  been  considered  in  the  making  of 
classifications  and  consequently  of  rates. 

The  three  great  classifications  differ,  of  necessity,  to 
an  important  degree  in  their  rates  for  certain  commodi- 
ties and  in  the  number  of  their  items.  They  apply  to 
sections  whose  industrial  and  traffic  conditions  are 
materially  unlike.  The  "Official"  has  6  numbered 
classes  and  2  rules,  with  10,087  items;  the  "  Southern," 
6  nxmibered  and  7  lettered  classes,  with  4273  items; 
the  "Western,"  5  numbered  and  5  lettered  classes, 
with  7419  items.  There  is,  as  we  have  said,  a  large 
volume  of  traffic  which  does  not  move  at  the  class 
rates,  but  at  "commodity  rates" — perhaps  as  much 
as  72%-75%  of  the  total  tonnage  of  the  United 
States.  This  traffic  is,  as  a  rule,  hauled  in  large  quan- 
tities, and  it  is  usually  of  heavy  and  bulky  goods,  as, 
for  instance,  coal,  live  stock,  oil,  lumber,  etc.  The 
"commodity  rates"  are  generally  lower  than  the 
' '  class  rates. ' '  The  percentages  of  the  ' '  commodity ' ' 
traffic  as  compared  with  the  total  differ,  of  course, 
in  the  three  great  classification  territories ;  it  is  nearly 
80%  in  that  of  the  "Official,"  70%,  of  the  "Western," 
and  65%,  of  the  "Southern."  In  this  respect,  the 
railways  of  the  United  States  have  acted  similarly 
to  those  in  Europe. 

As  the  classifications  become  more  definite, ratemak- 
ing  becomes  much  easier,  though  it  is  by  no  means  yet 
a  simple  task.  For  the  items  of  the  classification,  it 
is  difficult;  for  the  goods  moved  at  "  commodity  rates," 


230  Railway  Transportation 

it  is  more  difficult.  In  the  making  of  rates  for  either 
group — the  "class"  or  the  "commodity" — ,  a  number 
of  important  elements  must  be  considered,  as,  for 
instance:  (i)  the  competition,  (2)  the  value  of  the 
goods,  (3)  the  volimie  of  the  tonnage,  (4)  the  bulk  and 
weight,  (5)  the  risk,  (6)  whether  the  haul  is  one  or  both 
ways,  (7)  the  facilities  of  the  line  and  the  general  traffic 
conditions.  The  last  five  of  these  factors  might  be 
put  under  the  general  head  of  cost  of  service. 

Competition  has  been  an  important  factor  in  rate 
making  in  the  United  States,  though  in  more  recent 
years  the  competition  between  the  railways  and 
between  the  railways  and  the  waterways  has  con- 
stantly diminished  in  its  extent  and  intensity.  There 
is,  however,  still  considerable  competition  at  the 
important  centres.  The  competition  of  sections  with 
sections  upon  a  common  market  still  plays  a  large  r61e, 
and  over  this  the  railways  have  not,  and  cannot, 
become  the  masters.  Practically  no  important  area 
of  the  United  States  is  without  the  choice  of  a  number 
of  market  centres,  around  which  the  minor  markets 
all  rotate.  These  centres,  as,  for  instance,  Chicago, 
are  still  abimdantly  supplied  with  competitive  trans- 
portation. 

The  value  of  the  commodities,  and  consequently  of 
the  service  of  transporting  them,  has  been,  and  should 
have  been,  a  very  large  factor  in  rate  making;  from 
the  very  nature  of  transportation,  it  is  clear  that  the 
value  of  the  goods  and  services  should  always  be 
recognised.  This  can  generally  be  ascertained  with  a 
considerable  degree  of  accuracy,  and  it  is  a  fair  basis  of 
rates,  provided  all  classes  of  commodities  pay  that 
charge  which  represents  the  real  value  that  their 


United  States  231 

transportation  has  contributed  to  them.  This  princi- 
ple of  rate  making  has  usually  assumed  the  form  of 
what  the  traffic  can  bear.  The  traffic  manager  can 
ascertain  from  the  various  agents  of  his  line  how  large 
a  rate  will  secure  a  certain  volume  of  profitable  traffic; 
and  he  in  the  main  offers  a  rate  slightly  less  than  the 
one  which  the  present  traffic  can  possibly  bear,  since 
an  increase  in  it  is  usually  desired. 

The  cost  of  the  service  has  also  been  a  factor  in 
American  rate  making.  The  railway,  as  any  other 
business,  must  in  making  its  prices  consider  this  factor. 
It  is,  however,  with  the  railway  a  difficult  thing  to 
ascertain  with  exactness,  and,  since  practically  30%  of 
its  total  expenses  is  due  to  the  interest  on  the  fixed 
indebtedness  and  to  taxes,  expenses  which  must  be 
borne  irrespective  of  the  volume  of  traffic  and  earnings, 
the  cost  of  service  principle  of  price  making  cannot  be 
so  rigidly  enforced.  The  cost  of  railway  service,  per- 
haps to  a  greater  degree  than  that  of  any  other 
commodity,  is  a  joint  one.  It  must  be  distributed  to 
a  nimiber  of  different  items,  some  of  which,  as,  for 
instance,  taxes  and  interest  on  the  bonds,  do  not  vary 
with  the  tonnage. 

Rates  prior  to  1850  were  almost  entirely  a  problem 
for  the  small  line,  and  in  their  making  competition 
played  a  very  slight  part.  With  the  creation  of  the 
larger  lines  and  systems,  came  more  wide-spread  and 
active  competition,  though  it  remained  under  fair 
control  until  1868.  Now  for  a  time  it  reigned  alone, 
and  in  its  worst  form — in  rate  wars.  After  a  few  years 
of  exhaustion  and  ruin,  rate  making  by  competition 
was  largely  abandoned  in  favour  of  rate  making  by 
pools,  traffic  associations,  or  "community  of  interest " ; 


232  Railway  Transportation 

and  to  this  day  co-operation  in  some  form,  rather  than 
competition,  has  been  the  prevailing  force.  The  whole 
question  of  rate  making  will  become  more  clear  andjcon- 
crete,  if  we  trace  its  working  in  the  chief  groups  of  traffic. 
In  many  respects  it  has  had  its  most  difficult  task  in 
the  Trunk  Line  territory.  Here  the  traffic  has  been 
the  most  dense  and  at  the  same  time  the  most  diversi- 
fied ;  and  here  competition,  industrial  and  transporta- 
tional,  has  been  the  keenest.  It  is  in  this  territory, 
that  the  best  thought  has  been  directed  to  a  solution 
of  the  problems  of  operation  and  traffic.  The  Joint 
Executive  Committee  entered  upon  its  enormously 
difficult  tasks  as  early  as  1879,  and  a  far  step  was  taken 
toward  a  uniform  classification  and  schedule  of  rates. 
It  was  here  that  the  first  great  system  of  classes  and 
rates  was  formulated — the  "Official."  Here  it  was 
that  the  application  of  a  practical  distance  basis  of 
rates  was  first  and  most  completely  made;  and  here 
almost  alone  in  the  United  States  has  this  principle 
been  in  force.  The  east-  and  west-bound  traffic  of 
this  territory  has  long  been  moved  on  the  basis  of  the 
rate  of  the  shortest  route  between  New  York  and 
Chicago;  and  all  the  through-rates  have,  with  some 
comparatively  slight  exceptions,  been  percentages  of 
this  basal  rate.  New  York,  rather  than  Chicago,  has 
been  the  dominant  force,  since  the  majority  of  the 
traffic  has  been  eastward  bound.  This  centre  has 
received  commodities  from  all  points  equidistant 
from  it  at  equal  rates,  and  has,  of  course,  shipped  to 
them  at  equal  rates.  Such  a  system  has  practically 
placed  a  penalty  upon  the  roundabout  haul.  This 
system  of  classes  and  rates  has  now  for  practically 
thirty-four  years  remained  approximately  steady ;  and 


United  States  233 

the  industries  and  markets  located  within  the  territory 
of  the  "Official"  classification  have  long  known  with 
practical  accuracy  the  part  which  transportation  cost 
will  play  for  them. 

Rate  making  in  the  Southern  States  has  also  been 
most  difficult,  and  its  work  has  not  achieved  so  much 
towards  uniformity  as  has  been  the  case  in  the  Trunk 
Line  territory.  In  this  region  there  has  until  within 
recent  years  been  much  rivalry  between  the  railways 
and  between  the  railways  and  the  water-carriers. 
Water  competition  has  here  been  a  most  influential 
factor.  The  steamers  on  the  Atlantic  and  on  the 
Ohio  and  Mississippi  have  exercised  a  profound 
influence  upon  the  railways  operating  within  the  area 
of  the  "Southern"  classification.  The  chief  move- 
ment of  the  traffic  of  the  seaboard  section  has  followed 
the  general  course  of  the  ocean;  its  trunk  lines  east- 
ward and  westward  have  been  secondary  to  those 
running  northward  and  southward.  In  the  valley 
section,  the  Ohio  River  cities  have  exercised  the  con- 
trolling influence.  They  have  made  strenuous  efforts 
to  become  the  gates  through  which  the  Southern 
traffic  should  come  and  go.  This  traffic  has  been  far 
less  dense  and  diversified  than  that  in  the  Trunk  Line 
region.  The  average  train  load  has  been  smaller  and 
the  length  of  the  haul  shorter  than  in  the  Trunk  Line, 
the  Western,  or  the  Transcontinental  territory.  The 
local  traffic  of  the  railways  has  been  so  small,  that  the 
rates  for  its  movement  have  necessarily  been  high; 
and  they  would  have  been  still  higher  but  for  the  com- 
petitive traffic  which  the  railways  have  secured, 
oftentimes  by  offering  lower  rates  to  it  than  to  the 
intermediate  non-competitive. 


234  Railway  Transportation 

Rate  making  in  the  Southern  territory  has  also  been 
peculiar  in  the  fact  of  the  wide  prevalence  of  the 
"  basing-point "  system.  Its  water  competition  and 
its  "basing-point"  system  have,  in  fact,  been  the 
characteristic  features  of  this  region.  Before  the  days 
of  the  railway,  the  dominating  forces  in  the  control  of 
interior  commerce  were  crystallised  in  certain  cities, 
which  were  situated  upon  the  ocean  or  more  especially 
upon  one  of  the  comparatively  numerous  rivers.  The 
first  railways  were  built  to  connect  these  centres  with 
the  ocean  and  with  each  other.  At  this  time,  and  for 
many  years  afterward,  there  was  keen  competition 
between  the  railways  and  the  waterways  for  the 
transportation  of  the  products  that  were  collected  in 
these  centres,  particularly  the  interior  ones.  The 
control  of  the  state,  for  many  years,  either  did  not 
exist  or  was  wholly  ineffective;  and  it  was  very  natural 
that  there  should  be  many  discriminations  in  rates — 
low  ones  for  the  competitive  traffic  and  high  ones  for 
the  non-competitive.  Such  was  the  origin  of  the 
"basing-point"  system,  which  has  exercised  great 
influence  over  Southern  rates  to  this  day.  The  places 
where  competition  existed  were  in  the  early  days  made 
the  "  basing-points, "  and  so  they  have  continued. 

The  rates  for  the  haul  between  two  such  points  have 
been  less  per  ton  per  mile,  if  not  less  in  the  total 
amount,  than  for  the  haul  between  one  "basing- 
point"  and  an  intermediate  point  upon  the  same  line, 
or  between  two  intermediate  places.  The  chief  defence 
of  such  discriminations  in  rates  is  in  the  fact  that  the 
intermediate  haul  would  be  more  expensive  than  it  is 
but  for  the  volume  of  competitive  traffic  moved  over 
the  same  Hne  at  a  smaller  rate.     Until  very  recently, 


United  States  235 

the  purely  local  non-competitive  traffic  has  been 
entirely  too  slight  to  make  it  possible  for  the  railway 
to  offer  low  rates  for  its  transportation;  and  the  net 
earnings  from  the  volume  of  the  competitive  traffic 
hauled,  though  very  little,  have  enabled  the  railway 
to  an  extent  to  offer  a  lower  rate  on  the  non-competi- 
tive. Agriculture,  especially  the  cultivation  of  cotton, 
has  imtil  within  the  last  fifteen  years  been  the  absorb- 
ing enterprise  of  the  Southern  States,  and  it  is  still  the 
dominant  industry.  This  fact,  together  with  the 
further  one  that  the  great  majority  of  the  cotton  out- 
put has  been  transported  to  points  outside  of  the 
Southern  territory,  to  New  England,  or  Europe,  has 
perhaps  been  the  chief  reason  why  the  "  basing-point " 
system  has  continued  to  control  rate  making  for  so 
long  a  period. 

It  should  also  be  noted  that  such  a  system  of  rates 
has  brought  into  existence  and  caused  to  prosper  in 
the  Southern  region  many  distributing  or  jobbing 
centres.  These  centres  have  decentralised  the  trade 
of  the  South ;  they  have  taken  it  from  New  York  and 
Chicago.  Such  a  system  is  most  certainly  not  one  of 
absolute  justice  and  fairness  to  many  places.  From 
this  point  of  view,  it  cannot  stand  comparison  with 
the  distance  principle  of  rate  making.  It  has,  however, 
in  the  South  one  strong  point  in  its  defence — that  of 
practical  expediency.  It  could  not  be  defended  in  the 
Trunk  Line  territory.  The  conditions  of  its  traffic  have 
long  been  such,  that  the  practical  distance  rate  could 
apply  with  relative  expediency  and  fairness.  The  time 
is,  moreover,  rapidly  coming  in  the  South  when  the 
"basing-point"  rate  will  no  longer  be  seriously  needed, 
and  when  the  distance  principle  can  more  and  more 


236  Railway  Transportation 

be  applied.  The  economic  life  is  rapidly  changing, 
and  the  traffic  is  becoming  larger  and  more  diversified. 
And,  too,  the  definite  power,  which  was  in  1910,  in  the 
revision  of  the  Interstate  Commerce  Act,  given  to  the 
commission  over  the  long  and  short  haul,  will  cause  a 
gradual  abandonment  of  the  "  basing- point "  principle 
of  rate  making  in  favour  of  the  distance  one. 

Rate  making  in  the  territory  west  of  the  Mississippi 
River  and  Lake  Michigan  and  south  of  the  Wisconsin- 
Illinois  border  has  also  been  powerfully  influenced  by 
certain  centres,  particularly  Chicago  and  St.  Louis, 
situated  at  points  where  railways  and  water  compete. 
The  railways  of  this  vast  territory  have  operated  under 
conditions  in  many  respects  similar  to  those  in  the 
Southern  States.  Their  traffic  has  not  been  dense  or 
diversified,  and  there  has  been  considerable  competi- 
tion between  the  railways  and  between  the  railways 
and  the  waterways.  They  have  established  a  system 
of  differentials  upon  the  basis  of  the  rates  from  New 
York  to  Chicago  and  St.  Louis.  This  system  was 
created  in  the  early  days  of  the  rivalry  between  these 
two  vigorous  and  powerful  centres  for  the  trade  of  the 
Mississippi  Valley  and  the  Central  West — a  vast 
region  with  a  profitable  but  slight  traffic.  The  rail- 
ways offered  percentage  rates  on  the  basis  of  those 
between  New  York  and  Chicago,  in  order  to  secure  the 
traffic  that  moved  between  this  region  and  the  far 
East.  St.  Louis  for  a  time  had  129%  of  the  base  rates, 
then  116%,  and  stiU  later  1 14%.  On  the  traffic  which 
moved  westward  from  the  two  centres,  St.  Louis  and 
Chicago,  to  the  Missouri  River  cities,  the  railways 
fixed  such  rates  as  would  enable  products  moving  from 
or  through  either  of  these  centres  to  be  marketed  in 


United  States  237 

the  Missouri  River  towns  at  substantially  equal  prices. 
They  established  higher  rates  from  Chicago  to  these 
towns  than  from  St.  Louis,  in  order  to  offset  the 
greater  charge  to  St.  Louis  and  other  Mississippi 
River  towns  than  to  Chicago  on  commodities  hauled 
from  the  East.  The  through  rates  from  the  East  to 
the  Missouri  River  towns  were  made  the  same, 
whether  the  haul  was  via  Chicago  or  St.  Louis;  they 
were  made  up  of  three  local  ones:  (i)  from  the  East  to 
the  Mississippi,  (2)  from  the  Mississippi  to  the  Mis- 
souri River,  (3)  from  the  Missouri  River  westward. 

Such  a  system  of  rates  made  it  possible  for  the 
Missouri  River  cities,  Chicago,  and  St.  Louis,  to  com- 
pete as  market  centres  for  the  commodities,  largely 
raw  materials,  of  a  vast  territory  to  the  west  and 
south  of  them.  It  also  enabled  them  to  become  the 
distributing  centres  of  the  finished  goods  needed  by 
this  territory.  Such  a  system  gave  to  the  manu- 
facturer of  the  East  a  much  wider  market  for  his 
finished  products,  and  to  the  great  West,  a  more  pro- 
fitable one  for  its  cruder  commodities.  Under  the 
conditions  of  traffic  that  have  prevailed  in  this  terri- 
tory, it  has  been  inexpedient  for  its  railways  to  estab- 
lish a  complete  distance  basis  of  rate  making.  The 
time  has,  however,  practically  arrived  when  the 
distance  principle  may  be  here  quite  largely  applied. 

Rate  making  on  the  transcontinental  lines  has  been 
in  many  particulars  like  that  in  the  territory  of  the 
"Southern"  classification.  Their  traffic  has  been 
highly  competitive.  It  could  move  westward  by 
steamer  to  Colon,  across  the  Isthmus  by  rail,  and 
again  by  steamer;  and  vice  versa  for  the  eastward 
traffic.     It  could  go  all  the  way  to  and  from  Japan 


238  Railway  Transportation 

and  China  via  the  Suez  Canal.  To  meet  this  water 
competition,  the  transcontinental  railways  have  estab- 
lished "blanket"  rates,  for  both  class  and  commodity 
shipments,  on  the  westward  haul  from  practically  all 
the  important  points  east  of  the  Missouri  River. 
Their  "blanket"  rates  have  covered  almost  one-half 
of  the  entire  United  States.  These  lines  have  also 
established  a  system  of  "zone"  rates,  more  especially 
for  their  east-bound  traffic.  Their  low  commodity 
rates  for  hauls  from  one  ocean  to  the  other  have  applied 
to  a  large  number  of  articles — perhaps  more  than  a 
thousand.  The  charges  to  intermediate  points  have 
usually  been  larger  than  the  through  ones. 

The  blanket  and  zone  system  of  the  transcontinen- 
tal lines  rests  still  less  upon  the  basis  of  distance  than 
the  basing-point  system  of  the  South.  A  distance  rate 
for  their  traffic  would,  moreover,  have  been  a  dis- 
advantage to  the  shipper  as  well  as  the  carrier.  The 
traffic  has  until  very  recently  been  slight  and  the  dis- 
tance of  its  haul  has  been  enormous — as  much  as  3000 
miles.  It  has  been  largely  due  to  their  blanket  and 
zone  system,  that  the  West  and  far  West  have  had  such 
a  rapid  development,  and  that  the  traffic  of  the  trans- 
continental lines  has  had  great  increases  in  its  volume 
and  earnings.  Such  a  system  has  also  rendered 
service  to  the  manufacturer  of  the  East  and  the 
consumer  of  the  far  West.  It  has  meant  an  enor- 
mously wide  market  for  both  of  them .  The  conditions 
of  the  local  traffic  of  these  lines  are,  however,  fast 
changing.  A  few  more  years  of  growth  will  put  it  in 
the  position  of  the  master.  This  fact,  together  with 
that  of  the  increased  power  of  the  Interstate  Com- 
merce Commission  over  the  long  and  short  haul, 


United  States  239 

means  the  comparatively  rapid  abandonment  of  the 
blanket  system  of  rate  making  in  favour  of  a  practical 
distance  one. 

The  railways  of  the  United  States  as  a  whole  have 
not  followed  the  distance  principle  of  rate  making. 
They  have  in  many  sections  almost  completely  neg- 
lected distance  as  a  factor  in  rates,  particularly  in 
"commodity"  rates.  In  1906  perhaps  as  much  as 
three-fourths  of  the  tonnage  of  the  United  States  was 
carried  at  rates,  in  the  making  of  which  distance  was 
not  an  important  element.  The  non-distance  rate  has, 
as  we  have  said,  performed  many  excellent  services 
for  the  people  of  the  United  States;  their  condi- 
tions of  business  and  traffic  have  in  many  places  been 
such  that  the  rigid  distance  rate  would  have  been  an 
obstacle  to  their  development,  however  excellent  from 
the  point  of  view  of  absolute  or  abstract  justice. 
Practical  and  sane  expediency  has  been  its  chief 
defence,  but  this  has  become  weaker  as  economic  and 
traffic  conditions  have  changed.  In  the  future,  the 
people  of  the  United  States  must  have  more  of  the 
distance  factor  in  rate  making  than  they  have  had, 
though  the  change  should  come  slowly,  and  though 
their  system  should  never  become  rigid.  Abuses  may 
always  exist  in  the  non-distance  rate,  and  they  may  at 
times  become  grievous.  If  the  railways  ignore  dis- 
tance too  much,  they  stimulate  the  tendency  to 
excessive  concentration  of  population  and  industries 
in  the  large  centres,  and  place  too  heavy  burdens  upon 
their  local  non-competitive  traffic  in  favour  of  the 
long-distance  competitive  traffic. 

What  have  been  the  average  rates  upon  the  railways 
of  the  United  States  as  a  whole?    This  question  may 


2^0  Railway  Transportation 

best  be  answered  by  the  figures  of  receipts  per  ton  per 
mile  of  certain  representative  years: 

1867 1 .92  cents 

1870 1.89 

1880 1.28 

1885 i.oo 

1890 927 

1895 839 

1900 729 

1905 748 

1908 754 

It  will  be  seen  that  the  freight  rates  declined  during 
the  period  1 867-1 900  much  more  than  the  passenger. 
The  decHne  in  the  through  rates  was  considerably 
more  than  in  the  local.  The  figures  which  we  have 
presented  are,  however,  only  approximately  accurate 
indices  of  the  decrease  in  rates.  The  character  of  the 
traffic  had  also  diiring  this  period  a  change,  toward 
an  increased  volume  of  low-grade  commodities.  An 
increase  in  the  volimie  of  such  traffic  meant  a  decrease 
in  the  average  receipts  per  ton  per  mile,  though  the 
rates  remained  the  same — or  even  increased.  The 
difference  in  the  nature  of  the  traffic  could,  however, 
explain  only  a  part  of  the  decrease  in  the  ton  mile 
receipts.  The  rates  also  declined.  They  were  in 
1900  probably  less  than  50%  of  what  they  were  in  1870, 
perhaps  only  40%.  The  facilities  of  the  railways  and 
the  volume  of  the  total  traffic  had  important  increases ; 
and  the  competition  of  one  kind  or  another  was  more 
or  less  effective.  The  increase  in  the  ton  mile  receipts 
since  1900  has  been  due  to  the  policy  of  the  railways 
to  abolish  some  of  their  commodity  shipments — to 


United  States  241 

put  them  under  the  regular  classification,  the  rates  of 
which  are  higher  than  those  for  the  "commodity" 
shipment.  The  "class"  rates  have  also  in  a  few 
instances  been  increased,  largely  through  a  change  in 
the  classification  of  the  goods.  These  increases  since 
1900  have,  however,  not  kept  the  pace  of  the  rise  in 
the  prices  of  other  commodities  and  services. 

The  decline  in  freight  rates  was  for  the  period  1870- 
1900  much  greater  in  the  United  States  than  in 
Europe.  The  American  roads  and  their  equipment 
had  during  these  years  a  far  larger  growth  than  the 
European.  The  nature  of  the  American  traffic  also 
changed  more  rapidly  toward  the  lower  value  commod- 
ities. While  the  European  lines  were  hauling  much 
manufactures,  the  American  were  moving  much  raw 
materials.  The  majority  of  the  American  traffic 
moved  in  car-load  lots,  usually  of  60,000  poimds  or 
more;  much  of  the  European  was  shipped  by  the  piece 
or  in  five-  or  ten-ton  lots.  The  American  haul  was 
very  long,  while  the  European,  especially  the  Western 
European,  was  very  short.  The  American  railways 
did  not  collect  or  deliver  the  traffic;  the  British  did 
both. 

A  comparison  that  is  in  all  partictdars  fair  cannot, 
therefore,  be  made.  The  figures  in  the  table  which 
follows  must  consequently  be  modified.  The  differ- 
ences in  the  conditions  of  traffic  are,  however,  not  very 
great.  They  cannot  possibly  explain  away  all  the 
differences  in  the  ton  mile  receipts.  Afterall  allow- 
ance has  been  made,  the  fact  still  remains  that  the 
"freight  rates^of  the  United  States  have  been  lower  than 
those  in  Europe,  and  that  the  efficiency  of  the  Ameri-:, 

"  can  freight  service  has  upon  the  whole  been  grea^^er.  ^ 

16  "^ 


242  Railway  Transportation 

The  rates  for  small  shipments  and  short  hauls  are 
practically  the  same;  those  for  long  hauls  and  large 
lots  are  decidedly  less  in  the  United  States.  The 
table  is  presented,  not  as  an  absolute,  but  as  a  relative, 
exhibit  of  the  ton  mile  rates  for  haulage  of  the  five 
countries  which  we  have  taken  into  our  study : 


United 

United 

States 

France 

Germany 

Italy 

Kingdom 

1870 

1.89  cents 

1.78  c. 

{1872)  1.95  c. 

(Include  col- 
lection and 
delivery) 

1880 

i.aS      " 

1.68  •• 

1.97  " 

1890 

.927    " 

I.S4  " 

use. 

1.64  •' 

1900 

.729   " 

1.32  " 

1.27" 

(1899)  I.S7  " 

about  3.00  c. 

1905 

.748   " 

1.27  " 

1.21  " 

a.oo  " 

1908 

.754    " 

i.ai  " 

(1907)  1.26" 

1.56  " 
(about) 

a.oo  " 

(b)  Theory  of  Rates 

There  have  been  two  great  principles,  in  theory  at 
least,  of  rate  making:  (i)  the  cost  of  service,  (2)  the 
value  of  service.  The  American  railway  has,  as  we 
have  seen,  placed  much  the  larger  emphasis  upon  the 
second  principle — that  of  the  value  of  the  service  or 
what  the  traffic  will  bear.  It  has,  however,  rehed  in  a 
general  way  upon  the  first  principle.  The  cost  prin- 
ciple, which  dictates  a  practical  mileage  rate,  has 
been  too  inelastic  for  the  majority  of  the  traffic  of  the 
United  States.  The  value  of  service  principle  has, 
on  the  other  hand,  given  the  manager  great  freedom 
to  act  upon  his  discretion.  The  first  has  meant 
uniformity  and  few  discriminations;  the  second, 
elasticity,  adjustment  to  peculiar  traffic  conditions, 
complication,  many  discriminations. 

The  cost  principle  would  make  it  impossible  to  haul 


United  States  243 

crude  rock  or  sand  a  long  distance;  it  would  enable  a 
car  of  high  grade  furniture  or  automobiles  to  move  at 
a  rate  less  than  they  could  easily  afford  to  pay 
for  transportation.  It  is  necessary  that  both  should 
move,  and  it  is  fair  that  their  rates  should  be  in  pro- 
portion to  their  ability  to  pay  for  haulage,  as  well 
as  include  to  an  extent  the  element  of  cost  to  their 
carrier.  Such  a  differentiation  is  in  perfect  accord 
with  the  soundest  principles  of  valuation  that  prevail 
throughout  life.  The  railway  manager  may,  and  too 
oftentimes  does,  abuse  his  discretion  in  the  making  of 
these  differentials  in  values.  He  may,  and  does  at 
times,  forget  the  best  interests  of  the  public,  or  he  may 
even  ignore  them,  when  he  is  allowed  to  follow  too 
freely  the  value  of  service  principle  of  rate  making. 

The  cost  of  service  principle  has  in  practice  one 
serious  defect — that  it  is  most  difficult  to  ascertain  the 
specific  cost  for  a  certain  particular  service.  The  costs 
of  railway  service  are  fundamentally  joint ;  the  outlay 
for  each  item  of  traffic  is  in  a  large  measure  common  to 
the  whole  traffic,  certainly  to  a  great  part  of  it.  It  is, 
moreover,  not  fair  to  the  shipper  or  the  carrier  when 
rigidly  enforced.  Commodities  of  small  bulk  and 
weight  that  possess  large  value;would, according  to  such 
a  principle,  pay  only  slight  rates.  The  majority  of 
low  value  commodities  would  be  forced  to  pay  high 
rates,  since,  because  of  their  large  weight  and  bulk, 
their  cost  of  transportation  is  great. 

The  ideal  is,  we  believe,  to  combine  these  two  prin- 
ciples of  rate  making.  At  least  each  should  always 
be  applied  in  connection  with  the  other.  A  value  of 
service  rate  may  be  too  discriminatory  and,  therefore, 
unjust.     A  cost  of  service  rate  may  obstruct  the 


244  Railway  Transportation 

growth  of  business  and  traffic,  and  work  harm  to 
consumer  as  well  as  producer,  since  it  may  prevent  or 
restrict  their  wholesome  and  valuable  relationships. 
In  the  United  States  and  Great  Britain,  the  value  of 
service  principle  has  at  times  largely  displaced  the 
cost  of  service  principle,  and  rates  have  been  too 
discriminatory.  In  Germany  and  France,  where  for 
many  years  there  could  be  no  variation  from  a  distance 
rate  unless  by  official  permission  or  legislative  enact- 
ment, economic  life  has  been  restricted  by  a  too  rigid 
application  of  the  cost  principle.  To  relieve  the 
people  from  such  restrictions,  there  has  come,  to  an 
extent,  the  system  of  the  tapering  rate  by  barimes 
or  Staff eltarif en.  The  results  have  been  altogether 
wholesome,  and  the  relief  should  be  extended  to  a  far 
greater  extent.  The  French  and  the  German  systems 
of  rate  making  are  still  substantially  rigid ;  the  distance 
rate  is  still,  we  think,  too  largely  applied,  and  the 
taper  of  the  rate  is  still  too  slight.  Their  chief  task  is 
to  make  their  rates  more  adjustable  to  actual  condi- 
tions— more  flexible  to  practical  expediency.  Their 
barimes  are  too  much  the  product  of  abstract  phil- 
osophy, too  little  of  real  economic  judgment.  The 
chief  task  of  the  United  States  is,  on  the  other  hand, 
to  eliminate  more  of  the  abuses  of  discriminatory 
rates — to  apply  more  of  the  principle  of  distance  or 
cost,  more  of  universal  justice,  less  of  sharp  trading. 
The  American  problem  is  fundamentally  one  of  the 
reasonableness  of  rates,  of  what  discriminations  are 
just  and  what  unjust. 

For  References,  see  Chapter  XVI. 


CHAPTER  XVI 

RAILWAY  TRANSPORTATION  IN  THE  UNITED  STATES 

(Concluded) 

THE  ideal  of  state  operation  is  to  centre  all  of  its 
force  in  the  efficiency  of  management.  When 
the  railways  are  managed  by  private  enterprise,  the 
vital  problem  of  the  state  is  one  of  regulation.  This 
crystallises  itself  in  the  control  of  the  service  and  rates 
— primarily  in  the  reasonableness  of  rates.  In  the 
United  Kingdom,  France,  and  Italy,  there  is  but  one 
body  that  regulates  or  operates  the  railways — that  of 
the  central  administration.  The  control  is,  therefore, 
unified  and  centralised.  In  Germany  and  in  the 
United  States,  on  the  other  hand,  the  political  power 
is  divided;  the  states,  as  well  as  the  nation,  may 
operate  the  lines  or  regulate  their  operation.  In  the 
United  States,  it  was  the  state  which  granted  the 
charter  privileges ;  and  this  body  played  the  important 
r61e,  in  fact  the  exclusive  one,  in  all  the  earlier  attempts 
at  control. 

The  Ideals  and  Machinery  of  State  Control 

(j)  Control  by  the  States 

The  State's  control  has  been  exercised  through  the 
granting  of  charters,  through  general  legislation,  and 

245 


246  Railway  Transportation 

through  the  railway  commission  which  the  Legislature 
has  established. 

The  first  charters  granted  in  the  United  States  were 
copies,  mechanically  made,  of  the  British.  They 
were  very  general  as  to  the  power,  rights,  and  privi- 
leges of  the  companies  to  which  they  granted.  In  the 
matter  of  rates,  they  were  more  definite ;  practically  all 
of  them  contained  some  provision  of  maximum  rates, 
though  these  maxima  were  for  the  most  part  consider- 
ably higher  than  the  company  desired,  for  business 
reasons,  to  charge.  The  charters  were  for  a  time 
granted  by  special  acts  of  the  Legislature.  They  were 
merely  private  bills,  and  they  consequently  differed 
very  much  from  each  other.  Almost  unlimited  powers 
were  by  these  granted  to  the  railway  companies,  and 
no  special  machinery  was  provided  for  the  enforce- 
ment of  the  few  restrictions  that  were  placed  upon  the 
companies.  This  was  left  to  the  regular  judicial 
officers,  who  had  already  sufficient  tasks  to  perform. 
There  were,  to  be  sure,  a  few  instances  of  special 
machinery  for  the  enforcement  of  the  charter  provi- 
sions. In  the  first  charters  practically  no  reservations 
of  general  powers  to  the  Legislature  were  made.  A 
charter  granted, in  1829,  in  Massachusetts,  was  notable 
in  the  fact  that  it  reserved  to  the  Legislature  the  right 
to  revise  rates  whenever  the  net  earnings  were  in 
excess  of  10% — a  right  which  never  gave  real  power 
of  control. 

There  was  complete  lack  of  uniformity  in  practically 
all  the  early  charters;  each  special  act  was  peculiar. 
To  relieve  such  a  chaotic  condition,  the  work  of  form- 
ing a  general  law  on  railway  charters  was  taken  up  by 
a  few  States  at  a  fairly  early  date.    In  1833  such  a  law 


United  States  247 

was  passed  by  the  Legislature  of  Massachusetts,  though 
it  did  not  become  very  definite  or  comprehensive  until 
in  1855.  Other  States  slowly  enacted  such  general 
statutes.  The  general  laws  had,  however,  slight  influ- 
ence towards  uniformity,  since  the  legislatures,  even 
after  1855,  continued  to  issue  a  number  of  charters  by 
special  acts.  The  charters,  whether  according  to  a 
general  law  or  by  special  act,  continued,  moreover, 
wholly  ineffective  in  their  control  of  railway  trans- 
portation. There  was  practically  no  special  machin- 
ery of  supervision;  the  judicial  officers,  to  whom  was 
assigned  this  duty,  were  busily  employed,  and  they 
were  slavish  believers  in  the  dictiun  that  competition 
does  all  things  well. 

Most  of  the  States  came,  sooner  or  later,  to  have 
constitutional  provisions  in  reference  to  railway  char- 
ters, to  prevent  their  issue  except  in  accordance  with 
the  general  law.  In  a  nimiber  of  these  constitutional 
provisions,  the  Legislature  was  empowered  to  amend  or 
annul  the  charters  which  had  been  issued  by  special 
act,  in  case  the  public  interest  clearly  demanded  it. 
Many  of  these  provisions  were,  however,  left  unen- 
forced. The  charters  which  had  been  granted  by 
special  act  were  not  changed  or  declared  void,  and  the 
new  ones  were  none  too  carefully  scrutinised.  The 
railways  really  continued  unregulated  by  the 
States. 

The  charter,  whether  by  special  act  or  in  accord- 
ance with  a  general  law  or  constitutional  provision, 
failed  to  regulate  the  operation  and  the  traffic.  The 
failure  was,  moreover,  due  to  the  inadequacy  of  the 
charters,  since  practically  unlimited  rights  and  privi- 
leges had  been  granted  to  the  companies,  or  to  the 


248  Railway  Transportation 

neglect  of  the  Legislature  to  provide  special  machinery 
of  supervision.  Competition  had,  in  spite  of  the  wide- 
spread popular  notion  of  its  powerful  efficacy,  not 
prevented  abuses.  It  had,  on  the  contrary,  created 
many  of  them.  There  came  a  demand  for  a  change, 
for  some  new  method  of  state  control ;  and  much  legis- 
lation upon  the  various  phases  of  railway  transporta- 
tion, especially  those  of  rates,  was  soon  after  1870 
enacted.  Rates  must  be  regulated,  in  spite  of  the 
charter  maxima.  The  Legislature  must  prescribe  new 
maxima,  in  the  place  of  the  old  charter  ones,  which 
could  never  be  effective,  since  they  were  much  higher 
than  the  carrier  wished  to  charge,  or  it  must  create 
special  machinery  to  control  the  rates  fixed  by  the 
railways. 

Such  legislative  activity  was  during  the  period  1870 
-77  especially  vigorous  in  the  Central  Western  States, 
where  the  abuses  of  discriminatory  rates  had  become, 
under  the  stress  of  violent  rate  wars,  acute.  All  of 
the  new  laws  assumed  that  railway  transportation  is 
quasi-public,  even  though  its  operation  is  entirely 
carried  on  by  private  enterprise.  Prior  to  this  period 
the  railways  had  really  had  the  right  to  think  of  them- 
selves as  private ;  the  government  had  year  after  year 
given  them  permission  to  entertain  such  a  notion. 
Since  the  railway  was  assumed  to  be  a  public  carrier, 
the  State  Legislature  had  the  right  to  regulate  its 
operation  and  rates,  in  spite  of  the  charter. 

The  railways  opposed,  of  course,  such  an  assumption 
and  the  legislation  that  rested  upon  it.  They  made 
the  contention,  following  the  principle  of  the  famous 
Dartmouth  College  decision  of  the  Supreme  Court  of 
the  United  States,  rendered  in  18 19,  that  a  charter 


United  States  249 

from  the  state  is  a  contract  between  the  state  and  the 
company,  and  that  the  state  has  no  power  to  break  it. 
Their  contention  was  entirely  vahd  when  applied  to  a 
strictly  private  business,  but  the  Supreme  Court  of  the 
United  States  ruled,  in  the  Granger  cases  of  1876-77, 
that,  whenever  any  business  or  property  is  clothed 
with  a  public  interest,  the  Legislature  may  by  law  place 
limits  to  its  charges.  It  was  now  for  the  first  time 
made  unmistakably  clear,  that,  since  a  railway  is  a 
common  carrier  and  enjoys  from  the  state  the  special 
right  of  eminent  domain  in  its  roadway,  it  must 
operate  imder  the  restriction  of  supervision  by  the 
state  as  to  the  reasonableness  of  its  charges,  whatever 
may  be  its  charter  rights. 

Such  a  far-reaching  decision  had,  however,  com- 
paratively slight  influence.  A  period  of  depression 
soon  came,  and  much  of  this  vigorous  legislation  was 
repealed  or  seriously  revised.  It  was,  in  fact,  not 
imtil  1890  that  the  States  again  took  active  steps 
toward  eflficient  control  of  railway  rates. 

Control  through  specific  legislation,  as  well  as 
through  the  charters,  could  not  become  efficient  tmtil 
some  special  machinery  had  been  provided  for  the 
supervision  of  the  railways  and  for  the  enforcement  of 
the  legal  provisions.  This  machinery  has  taken  the 
form  of  a  commission,  and  this,  like  the  charters, 
constitutional  provisions,  and  special  laws,  has  differed 
widely.  In  some  States,  the  commission  has  been 
purely  advisory,  in  others,  regulative.  The  first  type, 
known  as  the  "weak  commission,"  has  had  its  home 
in  New  England;  the  second  or  "strong"  type  has 
prevailed  in  the  West  and  South.  A  number  of  the 
States  have  established  no  special  machinery.     In 


250  Railway  Transportation 

1908  there  were  commissions  of  some  type  in  only 
thirty-nine  of  the  States. 

Extreme  legislation  like  that  of  1870-77  was  not 
again  enacted  imtil  1 902 .  There  was,  as  we  have  seen , 
little  activity  on  the  part  of  the  States  from  1 883  to 
1 890.  And  the  tendency  of  the  control  by  the  States 
for  twelve  years  more  was  away  from  radicalism. 
During  this  period,  commissions  were  created  with 
some  powers  over  rates,  but  maximtmi  rate  laws  were 
not  enacted.  The  control  of  the  States  did  not,  how- 
ever, achieve  such  rapid  or  important  changes  as  was 
desired  on  the  part  of  the  more  radical  forces,  and 
during  the  five  years  1902-07  extreme  legislation  was 
exceedingly  active.  It  was  during  this  time  that 
fifteen  new  commissions  were  established,  though  of 
these  seven  were  recreations. 

Some  of  the  commissions,  as  they  exist  at  the 
present,  have  only  corrective  powers ;  they  may  revise 
the  rates  which  the  railways  make.  Others  have  the 
power  to  prescribe  schedules  of  rates  of  their  own 
initiative.  As  many  as  twelve  of  them  in  1908 
possessed  only  the  power  of  investigation  of  rates  and 
of  recommendation  of  changes.  The  newly  created 
ones,  those  of  the  period  1902-07,  have  large  adminis- 
trative powers  over  the  railway  service,  especially  over 
the  rates.  Thirteen  of  them  were  given  the  definite 
power  to  regulate  rates,  five  by  prescribing  the  sched- 
ules, eight  by  revising  those  made  by  the  railways. 
More  definite  powers  over  rates,  particularly  their 
discriminations,  have  recently  been  given  to  the  older 
commissions. 

The  creation  of  new  commissions  and  the  reforma- 
tion of  the  old  ones  were  not  the  only  acts  of  the  States 


United  States  251 

during  this  five-year  period  of  notable  activity  and  ra- 
dicalism. In  a  number  of  cases  the  legislators  were 
willing  to  leave  the  question  of  the  state's  control  of 
rates  solely  in  the  hands  of  a  commission.  In  other 
cases  they  were  not;  twenty  States  passed  maximum 
rate  laws,  and  nine,  maximum  rate  schedules.  The 
commissions  were,  of  course,  in  these  States  made 
merely  executive  bodies  without  discretion  as  to  the 
reasonableness  or  unreasonableness  of  rates. 

These  efforts  on  the  part  of  the  legislatures  were 
in  most  cases  without  sanity  of  judgment.  Their 
maximum  laws  and  schedules  were  usually  made  with- 
out sufficient  information  or  consideration,  and  they 
were  without  the  power  of  adjustability  to  the  actual 
conditions  of  the  traflic.  Fortunately,  most  of  their 
maxima  applied  only  to  the  passenger  service.  It  is 
perhaps  possible  for  the  British  Parliament,  after  the 
Board  of  Trade  has  spent  practically  two  years  in  a 
most  diligent  and  vigorous  effort  to  formulate  maxima 
for  the  freight  service,  to  enact  fairly  wise  statutory 
maxima.  For  an  American  legislature,  state  or 
national,  to  prescribe  such  maxima  without  long  and 
serious  effort  to  ascertain  all  the  actual  conditions 
and  facts,  is,  we  think,  nothing  short  of  the  wildest 
folly. 

A  commission  selected  solely  with  the  view  of 
efficiency,  and  to  which  large  powers  of  discretion  have 
been  given,  may  render,  and  has  rendered,  a  service 
to  the  public  of  very  great  value.  There  have  been, 
unfortunately,  too  few  of  such  commissions  in  the 
American  States.  Though  many  of  these  commis- 
sions have  not  been  properly  manned,  and  though  a 
number  of  them  have  not  had  sufiicient  freedom  of 


252  Railway  Transportation 

discretion,  their  work  has  upon  the  whole  been  valu- 
able. They  have  performed  the  important  educa- 
tional service  of  causing  the  shipper  and  the  carrier  to 
see  more  clearly  each  other's  views  and  rights. 

(2)  Control  by  the  Nation 

One  reason  for  the  inefficiency  of  control  by  the 
States  has  been  in  the  fact  that  this  control  could  not 
legally  cover  a  large  part  of  the  operation  and  traffic 
of  the  railways.  Perhaps  as  much  as  70%  of  all  the 
traffic  in  the  United  States  is  that  which  moves  across 
the  borders  of  States ;  and  this  traffic  is  solely  for  the 
nation  to  supervise.  The  "commerce  clause"  of  the 
national  constitution  reserves  the  regtdation  of  all 
interstate  trade  to  the  National  Government.  This 
clause  is,  however,  not  the  only  limitation  which  the 
national  constitution  places  upon  the  States  in  their 
supervision  of  railway  transportation.  The  fifth  and 
the  fourteenth  amendments  to  the  Constitution  give 
to  the  federal  courts  the  power  and  duty  to  protect  any 
citizen — and  a  corporation  is  in  law  a  citizen — from 
the  confiscation  of  his  property;  the  fifth  provides 
against  confiscation  by  Congress,  while  the  fourteenth 
specifically  protects  the  citizen  against  the  State 
Legislature.  The  Federal  Government  has,  therefore, 
abundant  power  to  supervise  and  control  all  interstate 
traffic,  and  to  protect  intra-state  transportation  from 
confiscatory  legislation. 

No  steps  were,  however,  taken  by  the  nation  to 
regulate  railway  traffic  until  after  1870.  There  had, 
in  fact,  to  this  date  been  no  demand  for  federal  regula- 
tion, and  little  for  that  by  the  States.     The  roads  had 


United  States  253 

not  until  1868  become  very  powerful,  or  their  abuses 
of  power  very  great.  It  was  not  until  the  rate  wars 
between  the  big  systems  brought  with  them  abusive 
discriminations  on  a  very  large  scale,  that  the  call  for 
state  or  federal  regulation  became  clear  and  persistent. 
The  first  move  made  by  the  nation  towards  the  exercise 
of  its  right  of  control  of  interstate  traffic  was  made  in 
1874 — in  the  appointment  of  a  senate  committee  (the 
Windom)  of  investigation.  This  committee  thought 
that  the  through  rates  on  the  traffic  from  the  Central 
West  to  the  East  were  too  high,  and  that  the  Federal 
Government  had  the  right  to,  and  should,  make 
reductions  in  them.  The  method  of  action  suggested 
by  it  was  that  of  water  and  rail  competition.  The 
suggestions  of  the  committee  came,  however,  to  prac- 
tically nothing.  They  were,  in  fact,  unsoimd.  Had 
the  committee  made  a  keener  observation  of  the 
situation,  it  would  have  discovered  that  the  chief  abuse 
was  not  in  the  size  of  these  rates,  but  in  their  discrim- 
inations, especially  in  the  discriminations  in  favour 
of  the  long-distance  competitive  traffic  over  the  non- 
competitive local  traffic.  The  source  of  these  abuses 
was  in  competition. 

Though  nothing  could  come  of  the  committee's 
suggestions,  and  though  the  nation  remained  inactive, 
popular  agitation  for  federal  regulation  continued. 
The  condition  had  most  certainly  been  bad,  and  the 
new  laws  of  the  States,  though  for  a  time  very  radical, 
made  little  improvement  in  it.  Abusive  discrimina- 
tions could  not  be  eliminated  by  the  prescription  of  new 
statutory  maxima.  The  task  was  not  in  the  largeness 
of  the  rates  as  a  whole,  but  in  their  variations.  It 
should,  however,  be  noted  that  the  most  effective  force 


254  Railway  Transportation 

for  the  elimination  of  such  an  unwholesome  condition 
had  already  been  applied — the  pool  or  traffic  associa- 
tion. The  rate  discriminations  were  really  slight  in 
1884  as  compared  with  those  of  ten  years  earlier.  The 
memory  of  the  old  condition,  however,  continued 
fresh,  and  the  popular  feeling  against  combination 
was  strong.  The  nation  must  take  a  more  active,  if 
not  indeed  an  extreme,  part. 

All  of  this  caused  the  appointment  of  another  senate 
committee  of  investigation — the  Cullom,  of  1 886.  The 
findings  of  this  committee  were  more  accurate  and  its 
diagnosis  of  the  trouble  was  keener.  It  was  found 
that  abusive  discriminations  had  for  a  good  many 
years  been  the  chief  factors  in  the  unsatisfactory 
condition.  Its  report  and  recommendations,  imlike 
those  of  the  Windom  committee,  materialised — ^in  the 
Interstate  Commerce  Act  of  1887.  This  first  act  of 
the  nation  to  regulate  the  railway  traffic  consciously 
copied  a  number  of  the  provisions  of  the  British  Acts 
of  1854  and  1873.  This  law  applied  to  all  interstate 
transportation  by  rail  alone,  or  by  rail  and  water,  and 
to  an  extent  to  the  transportation  between  the  United 
States  and  foreign  countries.  Just  as  the  rate  was 
the  heart  of  railway  transportation,  from  the  point  of 
view  of  both  carrier  and  shipper,  so  it  became  the  vital 
part  of  the  new  law.  The  chief  reason  for  its  existence 
was  in  the  demand  for  a  greater  justice  in  the  fixing  of 
rates.  They  must  be  reasonable  in  themselves;  they 
must  be  reasonable  as  compared  with  other  rates. 

This  Act,  which  has  been  to  this  day  the  fotmdation 
upon  which  the  people  of  the  United  States  have 
slowly  built  an  efficient  machinery  of  federal  control, 
crystallised  in  a  large  measure  the  principles  of  the 


United  States  255 

British  and  the  American  common  law  on  transporta- 
tion, long  in  vogue  but  rarely  enforced.  These  prin- 
ciples, as  applied  to  rates,  were,  however,  not  entirely 
applicable  to  the  railways,  even  though  they  were  well 
adapted  to  carriers  like  the  toll-taking  highway  or 
canal.  The  common  law  approved  all  rates  provided 
none  of  them  were  unreasonably  high.  The  vital 
point  in  railway  rates  was  not  so  much  in  the  absolute 
reasonableness  as  in  the  relative — in  the  rate  to  one 
shipper  as  compared  with  that  to  another.  The  chief 
design  of  the  new  federal  law  was  to  prevent  unreason- 
able and  unjust  discriminations  to  shippers  in  inter- 
state commerce. 

This  law  specified  and  defined  the  rights  and  powers 
of  the  National  Government  over  railways.  It  also 
created  the  machinery  for  the  enforcement  of  its 
provisions — the  Interstate  Commerce  Commission, 
largely  after  the  model  of  the  British  Railway  and 
Canal  Commission  of  1873.  The  commission  consisted 
of  five  members,  who  should  devote  all  their  time  to 
the  performance  of  its  tasks,  appointed  by  the  Presi- 
dent. Their  term  of  service  was  fixed  at  six  years 
except  for  the  first  members,  who  held  as  follows :  one 
for  two  years,  one  for  three,  one  for  four,  one  for  five, 
and  one  for  six.  That  they  might  be  as  non-partisan 
as  possible,  it  was  provided  that  not  more  than  three 
of  them  could  be  of  one  political  party  and  that  they 
should  be  removable  only  for  inefficiency,  neglect  of 
duty,  or  malfeasance. 

This  Act  created  the  machinery  of  federal  control, 
but  it  did  not  clearly  define  its  functions  and  power. 
Experience  alone  could  do  this.  The  British  com- 
mission of  1873,  after  which  it  was  modelled,  had  most 


256  Railway  Transportation 

vague  functions  and  powers,  and  its  real  failure  was 
not  well  known,  even  in  Great  Britain,  until  far  into 
the  eighties.  The  American  commission  had  some- 
thing of  each  of  the  three  governmental  functions — 
the  legislative,  executive,  and  judicial — ,  but  in  all  of 
its  work  it  was  subject  to  Congress  and  the  federal 
courts.  A  revision  in  1 889  gave  it  the  power  to  enforce 
the  provisions  of  the  act  by  summary  process,  to 
require  publications  of  rates,  and  to  institute  investiga- 
tions into  any  phase  of  interstate  traffic. 

The  commission  found  at  the  outset  that  its  chief 
duty — to  ascertain  and  pass  judgment  upon  points 
of  reasonableness  of  rates — was  a  most  complicated 
one.  It  was  an  immense  practical  question.  The 
shipper  and  all  the  phases  of  his  industries  were 
involved  in  it.  The  railway  and  all  of  its  prosperity 
were  also  vitally  interested.  The  law,  which  it  was  to 
enforce,  condemned  only  the  unreasonable  discrimina- 
tions; it  could  not  mean  all  discriminations  in  rates, 
even  though  some  of  the  radicals  had  struggled  for  the 
inclusion  of  all.  What  were  reasonable  and  just 
discriminations?  What  unreasonable?  Only  the  man 
who  was  totally  ignorant  of  the  traffic  conditions  of 
the  United  States  could  fancy  these  simple  questions. 

It  was  at  the  beginning  seen,  though  vaguely,  that  a 
different  charge  for  a  similar  service  might  be  justified 
by  the  fact  of  different  traffic  conditions.  The  vital 
point  was  in  these  actual  conditions,  whether  their 
dissimilarity  was  sufficient  to  justify  a  different  rate  or 
not.  The  American  Act  followed  the  "equality 
clause"  of  the  British  Act  of  1845,  in  condemning  as 
illegal  all  difference  in  rate  between  shippers  at  work 
under  the  same  traffic  conditions.    But  in  few  cases 


United  States  257 

were  the  conditions  exactly  the  same.  It  was  very 
clear  to  the  commission,  that  many  discriminations 
should  be  allowed  on  the  basis  of  the  volume  of  the 
commodities  and  the  cost  and  risk  of  their  trans- 
portation. 

Since  the  Act  did  not  define  the  term  "unreason- 
able, "  the  commission  must  work  with  the  actual  facts 
and  conditions  of  traffic  without  a  clear  guiding  prin- 
ciple; and  its  power  extended  only  to  those  cases  of 
unreasonableness  of  which  complaint  was  made  to  it. 
The  reasonableness  of  the  whole  schedule  of  rates  was, 
therefore,  never  brought  to  its  attention,  or  to  that  of 
the  federal  courts  on  appeal  from  the  findings  of  the 
commission.  The  reasonableness  was,  consequently, 
a  relative,  not  an  absolute,  thing;  it  was  a  matter  of 
preference  to  persons  or  places. 

A  notable  example  of  preference  was  in  the  long 
and  short  haul.  The  federal  law  condemned  a  greater 
charge  in  the  aggregate  for  traffic  moved  between  two 
places  along  the  same  line,  in  the  same  direction,  and 
at  the  same  time,  than  for  two  points  farther  apart  on 
the  same  line,  unless  the  conditions  of  traffic  were 
actually  dissimilar.  Had  the  phrase  "substantially 
similar  circumstances  and  conditions"  not  been 
inserted  into  the  "long  and  short  haul"  clause,  the 
Interstate  Commerce  Act  woiild  have  completely 
eliminated  the  value  of  service  principle  of  rate 
making.  The  insertion  of  this  phrase,  which  came  in 
1887  as  a  compromise  after  a  very  hard  fight,  made  it 
possible  for  rates  to  continue  to  adjust  themselves  to 
the  actual  conditions  of  traffic,  and  to  stimulate 
greater  development  of  the  industries  in  many  sections 
of  the  United  States.     It  enabled  the  Supreme  Court, 

17 


258  Railway  Transportation 

in  over-ruling  the  commission,  to  authorise  the  con- 
tinuance of  the  value  of  service  principle. 

The  Act  of  1887  gave  power  to  the  commission  to 
grant,  after  investigation,  exceptions  to  the  "long  and 
short  haul "  clause.  Many  applications  for  relief  from 
its  provisions  were  early  made.  The  commission 
almost  at  the  outset,  though  after  some  investigation, 
made  the  ruling  that  the  burden  of  proof  rested  upon 
the  railways  to  justify  a  departure  from  the  regular 
rule  of  the  clause — that  they  must  prove  the  dis- 
similarity of  conditions  and  circumstances.  The 
commission  held,  moreover,  that  the  competition 
between  railways  did  not  constitute  suflficient  dis- 
similarity, though  that  between  a  railway  and  a  water- 
way did.  This  decision  was  soon  modified,  though  only 
slightly.  The  commission  now  ruled  that  the  fact  of 
dissimilarity  of  conditions  did  not  in  itself  sufficiently 
justify  the  greater  charge  for  the  shorter  havd,  that 
only  its  permission  could. 

This  far-reaching  decision  of  the  commission  was  in 
1897  declared  void  by  the  Supreme  Court,  in  the 
Alabama  Midland  case.  The  court  held,  that  the 
competition  of  railways  and  of  trade  centres  was  an 
important  factor  in  the  conditions  of  traffic,  that  the 
railways  need  not  ask  the  commission  for  relief — that 
the  prohibition  against  their  departure  from  the 
general  rule  of  the  "long  and  short  haul"  clause  did 
not  really  exist.  In  the  mind  of  the  court,  any  com- 
petition that  was  effective  made  a  smaller  charge  for 
the  longer  haul  reasonable.  Such  a  decision  of  the 
court,  though  it  was  a  severe  criticism  of  the  judg- 
ment of  the  commission,  was,  we  think,  highly  fortu- 
nate.    It  enabled  the  railways  operating  in  regions  of 


United  States  259 

slight  traflBc  to  prosper  and  to  add  to  the  development 
and  prosperity  of  their  territory ;  and  there  were  then, 
as  we  have  seen,  a  ntunber  of  such  regions,  notably  in 
the  South.  A  rigid  enforcement  of  the  "long  and 
short  haul"  clause  wotdd  at  that  date  have  been  a 
serious  handicap. 

The  federal  law  of  1887  contained  a  number  of 
excellent  provisions,  though  they  were  not  stated  with 
great  definiteness.  Its  clauses,  which  created  a  com- 
mission, and  which  forbade  discriminations  in  rates 
between  persons  located  under  the  same  conditions  of 
traflfic,  meant  a  long  step  toward  a  wise  and  efficient 
federal  control.  When  the  Act  forbade  pooling,  and 
thereby  put  a  practical  end  to  it,  Congress,  as  the 
States  had  before  done,  deprived  the  railways  of  the 
only  real  instrument  that  they  had  to  abolish  dis- 
criminations in  rates.  The  nation  was  with  one  hand 
making  a  serious  effort  to  prevent  discriminations; 
with  the  other  hand  it  was  creating  conditions  under 
which  discriminations  must  flourish.  Congress,  when 
it  enacted  the  anti-pool  clause,  made  a  step  in  the 
wrong  direction — in  fact  a  step  in  advance  of  the 
common  law.  The  courts  would  not  enforce  the  pool- 
ing contracts;  Congress  specifically  declared  them 
illegal,  and  thereby  added  to  the  diffictdty  of  the  task 
of  the  commission  to  prevent  as  far  as  possible  un- 
reasonable discriminations. 

The  commission  had,  as  we  have  said,  a  tremendous 
task  to  perform.  The  British  Railway  and  Canal 
Commission  had  done  little  to  solve  the  problem  of 
reasonable  discriminations  in  rates,  even  for  Great 
Britain;  it  had  formulated  no  guiding  principle  that 
could  aid  commissions  at  work  in  other  countries 


26o  Railway  Transportation 

where  traffic  conditions  had  many  points  of  dissimilar- 
ity to  the  British.  The  state  commissions  in  the 
United  States  had  formulated  no  clear  principle  of 
decision,  even  for  the  local  intra-state  traffic.  Had 
they  done  so,  the  principle  would  have  been  of  little 
service  as  a  guide  to  the  Interstate  Commerce  Com- 
mission, the  scope  of  whose  jurisdiction  extended 
throughout  a  vast  and  diversified  territory.  That  the 
national  commission  should  have  for  some  years 
laboured  in  comparative  darkness,  was  no  particular 
fault  of  its  own.  When  we  consider  its  vague  func- 
tions and  powers  as  assigned  to  it  by  the  Act  of  1887, 
its  enormously  complicated  and  difficult  tasks,  and  the 
lack  of  that  knowledge  which  can  alone  come  from 
actual  experience,  we  have  little  disposition  to  criticise 
unfavourably  the  work  of  the  Interstate  Commerce 
Commission,  or  that  of  the  courts  when  they  have 
overruled  its  decisions.  We  shall  judge  it  largely  by 
its  policies  and  principles  of  action,  rather  than  its 
actual  achievements.     What  have  these  been? 

Almost  at  the  beginning,  the  commission  came  to 
the  conclusion  that  the  cost  of  the  service  should  not 
be  its  chief  guide  of  the  reasonableness  of  a  complained- 
of  charge.  It  believed  that  the  specific  cost  of  any 
single  service  could  not  be  accurately  ascertained,  and 
that,  were  it  ascertainable,  it  would  not  be  a  fair  guide 
of  the  reasonableness  of  its  rate.  It  decided  to  make 
this  the  supplementary  principle  of  reasonableness. 
By  this  decision,  the  commission  accepted  the  fact 
that  railway  rates  are,  and  must  be,  things  of  practical 
expediency,  as  well  as  justice.  The  cost  principle  or 
the  distance  principle — and  the  second  is  a  concrete 
form  of  the  first — would  have  been  a  much  easier  and 


United  States  261 

more  routine  basis  upon  which  to  decide  the  reason- 
ableness. It  would,  however,  have  been  an  obstacle 
to  the  development  of  railway  traffic  and  of  economic 
life  in  general.  The  conditions  of  American  economic 
life  were  then  such  that  a  distance  or  cost  rate  could 
not  have  rigidly  been  enforced  in  many  sections  with- 
out serious  detriment. 

The  commission,  while  it  has  never  made  cost  its 
chief  guide  in  its  own  investigations,  and  while  it  has 
never  permitted  the  railways  to  place  too  much  empha- 
sis upon  it  in  their  defence  of  a  certain  rate,  has  always 
relied  upon  it  to  a  considerable  degree,  particularly  in 
some  of  its  later  rulings.  The  commission  has  been 
charged  with  inconsistency,  since  cost  has  been  allowed 
by  it  to  play  a  much  more  important  r61e  in  determin- 
ing reasonableness  in  some  of  the  later  cases.  There 
is,  however,  no  solid  reason  for  the  charge.  Cost  may 
be  a  fairer  guide  of  reasonableness  in  some  cases  than 
in  others;  and  the  railway  managers  have  keenly 
appreciated  this  fact  in  making  their  defence. 

When  the  commission  decided  to  make  the  value  of 
the  service,  or  the  value  of  the  goods,  its  chief  prin- 
ciple of  reasonableness,  it  did  the  wisest  possible  thing, 
though  such  a  decision  meant  that  its  labours  would 
be  greatly  increased.  To  determine  the  reasonable- 
ness of  a  rate  upon  the  basis  of  the  value  of  the  haul, 
is  an  enormously  difficult  task.  The  value  of  the 
service  depends  fundamentally  upon  traffic  and  econo- 
mic conditions,  and  these  are,  in  the  United  States  at 
least,  wonderfully  varied  and  complex. 

With  the  principle  of  value  as  the  chief  guide,  the 
commission  must  pass  upon  that  most  difficult  ques- 
tion of  the  natural  advantages  of  locations.     It  seems 


262         Railway  Transportation 

a  fair  thing  to  allow  each  place  the  full  benefit  of  its 
own  advantages  or  values,  whether  natural,  geographi- 
cal, or  transportational ;  and  the  commission  has 
accepted  this  as  in  the  main  a  correct  principle.  What 
these  advantages  are  actually  worth  has,  however, 
been  a  point  most  difficult  to  ascertain.  The  railways 
of  the  United  States  have  often  established  rates  that 
make  comparatively  equal  the  inequalities  of  advan- 
tages of  competing  centres — that  is  places  whose 
advantages  are  great  have  been  by  the  railway  rate 
put  in  the  condition  of  equality  on  a  common  market 
with  those  whose  advantages  are  less.  The  commis- 
sion in  its  decisions  has  not  admitted  the  contention  of 
the  railways,  that,  because  of  the  value  of  the  service, 
they  may  follow  at  will  the  policy  of  levelling  up  or 
down  the  peculiar  advantages  of  certain  market  cen- 
tres. It  has,  on  the  other  hand,  acted  upon  the 
principle  that  no  centre,  however  great  its  peculiar 
advantages,  may  have  a  complete  monopoly  over  a 
certain  market,  and  thereby  make  the  consumer  pay 
higher  prices  for  goods  than  those  which  another 
place  would  charge  for  them  had  it  fair  railway 
rates. 

Upon  the  basis  of  the  value  of  service,  the  commis- 
sion has  been  forced  to  consider  all  the  intricacies  of 
competition.  This  factor  has  been  allowed  by  the 
commission,  in  many  cases,  to  play  an  important  r61e 
in  determining  the  reasonableness  of  rates.  It  has 
ruled,  that  this  factor  may  justify  a  lower  rate  on  goods 
for  export  than  on  those  for  domestic  use.  It  has  also 
ruled — and  its  ruling  has  been  sustained  by  the 
Supreme  Court — ,  that  competition  between  railways 
or  between  railways  and  waterways  should  be  main- 


United  States  263 

tained,  in  order  that  monopoly  of  carriers  or  of 
producers  may  be  prevented. 

The  American  commission  has  then,  as  the  British, 
formulated  no  fixed  and  dogmatic  rules  or  principles 
of  reasonableness.  It  may  have  at  times  been  too 
imcertain  and  changeable  in  its  principles,  but  no 
general  charge  of  vacillation  can  hold  against  it.  The 
questions  which  have  been  presented  to  it  have 
involved  such  varied  factors,  that  it  must,  if  it  acted 
wisely,  act  according  to  the  real  facts  and  conditions, 
and  not  after  a  dogmatically  unalterable  principle. 
It  has,  wisely,  never  applied  a  rule  of  automatic 
reasonableness;  nor  has  it  made  effort  to  do  the 
impossible — to  make  absolutely  perfect  adjustments 
of  rates.  It  has,  however,  striven  to  the  best  of  its 
ability  to  prevent  as  many  maladjustments  as  possible. 
Its  greatest  achievements  have  been  its  investigation 
into  and  publication  of  the  actual  facts  of  railway 
operation,  for  the  benefit  of  the  public,  and  for  use  as 
prima  facie  evidence  in  all  judicial  proceedings,  and 
its  educational  work  of  causing  the  carriers  and 
the  pubUc  to  imderstand  the  better  each  other's 
views. 

The  power  of  the  commission  was,  as  we  have  said, 
restricted  to  certain  complained-of  rates.  It  could 
not  formulate  or  apply  a  universal  schedule  of  rates. 
Congress,  wisely,  enacted  no  statutory  maxima,  and 
it  did  not  empower  the  commission  to  make  them. 
The  commission  thought  that  it  possessed  the  implied 
power  of  prescribing  a  certain  rate,  to  take  the  place  of 
the  one  declared  unreasonable;  and,  upon  such  an 
interpretation  of  the  law,  it  acted  until  it  was  over- 
ruled by  the  Supreme  Court.     This  power  was  ques- 


264         Railway  Transportation 

tioned  by  the  court  in  1896,  in  the  Social  Circle  case. 
In  1897,  in  the  Maximum  Rate  case,  the  court  ruled, 
that  the  power  to  prescribe  a  single  rate,  or  to  fix  one, 
did  not  belong  to  the  commission — that  under  no 
conditions  whatever  had  the  commission  the  power  to 
prescribe  a  maximum,  a  minimum,  or  any  other  rate 
for  the  future. 

The  commission  had  up  to  the  first  of  1906  consid- 
ered 3791  informal  complaints.  It  had  effected  a 
settlement  without  its  own  formal  action  in  2400  of 
them — an  important  work.  It  had  prior  to  this  date 
received  practically  800  formal  complaints,  nearly  one- 
half  of  which  were  later  withdrawn.  By  this  time  it 
had  rendered  formal  decisions,  more  or  less  favourable 
to  the  shipper,  in  approximately  200  cases,  in  most  of 
which  the  commission  made  a  suggestion  as  to  the 
extent  to  which  it  thought  the  rate  too  high.  In  the 
case  of  about  50  of  these  the  railways  refused  to  accept 
the  suggested  rate.  The  courts  had  up  to  January  i, 
1906,  overruled  the  decisions  of  the  commission  in 
about  90%  of  the  cases  which  it  had  taken  before 
them  for  the  enforcement  of  its  order.  The  commis- 
sion had,  so  the  courts  ruled,  made  a  wrong  interpreta- 
tion of  the  law  or  of  the  facts  involved. 

The  policy  of  the  Supreme  Court  in  allowing  a  judi- 
cial review  of  the  commission's  decisions  did  not  until 
1890  become  definite  or  complete.  A  clear  policy, 
which  has  exercised  great  influence  upon  both  the 
carrier  and  the  public,  was  now  formulated.  It  was 
declared,  that,  since  a  railway  is  a  citizen  in  the  law, 
its  property  is  entitled  to  all  the  protection  which  the 
fourteenth  amendment  to  the  Constitution  guarantees 
to  a  citizen — that  its  property  can  not  be  taken  with- 


United  States '  265 

out  due  process  of  law.*  Such  a  decision  placed  the 
ultimate  determination  of  the  reasonableness  of  rates 
in  the  power  of  the  federal  courts. 

The  Supreme  Court  has,  however,  found  the  ques- 
tion of  reasonableness  so  difficult,  that  it  has  not  yet 
clearly  named  the  factors  wJiich  constitute  it.  Must 
the  earnings  be  large  enough  to  pay  a  fair  dividend  to 
the  share-holders,  as  well  as  the  charges  on  the  fixed 
indebtedness  and  on  operation  and  maintenance? 
How  large  may  the  dividend  be?  Smyth  vs.  Ames,  a 
notable  decision,  of  1898,  laid  down  two  bases  for  the 
consideration  of  reasonableness  of  rates:  (i)  the  fair 
value  of  the  railway  property,  (2)  the  right  of  the 
railway  in  terms  of  the  right  of  the  public.  The 
contention  that  this  decision  of  the  court  was  too 
favourable  to  the  carriers,  is  difficult  to  defend.  The 
second  basis  is  sufficient  to  cause  all  railway  rate 
questions  to  be  considered  in  vital  relationship  with 
public  interest  and  welfare.  The  same  decision  also 
held,  that  a  railway  possessed  the  right  to  appeal  to  the 
federal  courts,  on  the  ground  of  equity,  in  unreason- 
ably low  rates,  as  well  as  to  bring  suit  in  these  courts 
to  prevent  the  enforcement  of  such  rates,  whether  by 
the  state  or  national  officials. 

The  difficulties  tmder  which  the  commission  la- 
boured, and  the  fact  that  in  a  number  of  important 
cases,  notably  the  Maximum  Rate  case  of  1897,  its 
decisions  were  completely  reversed  by  the  courts,  gave 
cause  for  a  popular  demand  for  a  revision  of  the  Inter- 
state Commerce  Act.  This  demand  became  stronger 
with  the  years.  The  enactment  of  the  Elkins  Act  in 
1903,  by  far  the  most  important  amendment  to  the 

*  Chicago,  Milwaukee  &  St.  Paul  Ry.  Co.  vs.  Minnesota. 


266  Railway  Transportation 

federal  transportation  law,  since  its  passage,  came  in 
answer  to  this  popular  call.  This  amendment,  like 
the  clauses  of  the  original  act,  was  designed  solely  to 
eliminate  abusive  discriminations  in  rates.  It  required 
the  carriers  to  operate  according  to  their  published 
schedules  of  rates.  It  declared  any  deviation  from 
these  a  misdemeanour,  on  the  part  of  the  corporation, 
or  its  officer  or  agent.  It  placed  a  penalty  for  such 
deviation,  alike  upon  the  railway  and  the  shipper.  It 
was  then  believed,  and  perhaps  with  good  reason,  that 
the  chief  cause  of  rebates  was  in  the  tremendous  power 
of  certain  large  corporate  shippers  to  force  the  rail- 
ways to  make  lower  rates  upon  their  shipments  than 
upon  the  traffic  of  their  smaller  rivals.  The  Elkins 
Act  meant  an  advance  in  the  efficiency  of  federal 
control ;  rebates  have  most  certainly  not  existed  since 
1903  to  the  same  degree  as  before  that  date. 

The  popular  demand  for  still  further  changes  in  the 
federal  transportation  law  continued.  The  call  for 
more  efficient,  even  extreme,  control  of  rates  continued 
to  be  heard  during  the  years  1903-08.  The  State 
legislatures  were,  as  we  have  seen,  all  too  eager  to 
answer  this  call,  and  during  this  period  they  passed 
some  of  the  most  ill-considered  acts  in  the  history  of 
the  American  railways.  Congress  also  answered  this 
call  by  the  enactment  of  the  Hepburn  Bill,  of  1906 — 
a  vitally  important  revision  of  the  Interstate  Com- 
merce Act. 

President  Roosevelt,  who  always  keenly  felt  public 
opinion,  and  who  could  give  expression  to  it  in  most 
vigorous  fashion,  was  the  compelling  force  back  of  the 
passage  of  this  revision.  He  had  as  early  as  1904 
recommended  to  Congress,  that  it  confer  upon  the 


United  States  267 

commission  full  power,  upon  complaint  and  after 
hearing,  to  prescribe  certain  rates,  which  should  be 
effective  until  nullified  by  a  court  of  review.  Such  a 
far-reaching  suggestion  brought  forth  the  most  intense 
interest,  on  the  part  of  the  public  and  the  railways 
alike,  in  the  revision  of  the  commerce  law.  The 
American  people  now  became  more  deeply  interested 
in  railway  legislation  than  at  any  other  time  in  their 
history.  The  Senate  Committee  on  Interstate  Com- 
merce, after  the  most  exhaustive  hearings,  issued,  in 
1905-06,  five  large  volumes  of  hearings  and  a  digest — 
the  most  complete  and  valuable,  in  spite  of  some 
inaccuracies,  document  on  the  railways  of  the  United 
States  ever  published.  This  report,  especially  its 
digest,  had  great  influence  upon  the  members 
of  the  national  legislature,  and  upon  public 
opinion. 

President  Roosevelt  sent  to  Congress  another  vigor- 
ous and  effective  message;  and  early  in  1906  the 
Hepburn  Bill  was  passed  by  the  Lower  House.  Its 
passage  was  by  the  almost  unanimous  vote  of  346  to 
7 — a  vote  too  overwhelmingly  one-sided  to  show  wide- 
spread independence  of  thought.  The  Senate  might 
or  might  not  pass  it,  and  this  fact  brought  much 
keenness  to  the  public  interest,  and  much  activity  on 
the  part  of  the  railways  in  their  publicity  programme. 
In  the  Senate,  the  bill  was  submitted  to  a  most  search- 
ing criticism.  A  great  debate  was  held  over  its 
passage — a  gigantic  battle  between  the  conservatives 
and  the  radicals.  The  bill  finally  passed,  with  only 
three  dissenting  votes — an  opposition  so  slight  at  the 
end  as  to  indicate  that  the  bill  was  comparatively 
perfect,  or  that  the  Senate,  as  well  as  the  House,  may 


268         Railway  Transportation 

at  times  express  in  its  vote  sentimentalism  rather  than 
independence  of  thinking. 

The  Hepburn  Bill  for  the  first  time  specifically 
placed  under  federal  control — that  is  the  control  of 
the  commission — the  express-  and  sleeping-car  com- 
panies, and  the  pipe-line  transportation  companies 
except  those  of  water  and  gas.  It  also  covered 
switches,  spurs,  terminals,  and  all  vehicles  of  carriage, 
whether  owned  by  the  railways  or  by  separate  com- 
panies. It  had  been  in  these,  rather  than  in  the 
regular  forms  of  railway  carriage,  that  most  of  the 
abuses  had  occurred. 

Discriminations  had  been  notable  in  the  case  of  the 
coal  roads — the  railways,  which  were  also  in  large  part 
the  owners  of  coal  fields.  These  roads  had  trans- 
ported their  own  coal  at  a  lower  rate  than  that  which 
they  charged  the  rival  coal  mines.  To  meet  this 
abusive  discrimination,  a  clause  was  inserted  in  the 
Hepburn  Bill,  which  commanded  all  such  railways  to 
sell  their  holdings  in  the  coal  fields.  It  declared  that 
no  railway  would  be  allowed  after  the  first  of  May, 
1908,  to  move  in  interstate  commerce  any  goods,  other 
than  timber  or  its  manufactured  products,  which  were 
produced  directly  by  itself  or  indirectly  under  its 
authority. 

This  clause,  widely  known  as  the  "commodity 
clause,"  has  been  the  subject  of  much  consideration 
before  the  courts.  It  was  in  1908,  by  the  Circuit 
Court  of  the  Eastern  District  of  Pennsylvania,  held 
to  be  practically  unconstitutional^ ;  and  the  court  gave 
permission  to  the  commodity  company  to  sell  its 
stock  to  the  share-holders  of  the  railway.     During  the 

'  164  Fed.  Rep.,  215. 


United  States  269 

next  year,  the  Supreme  Court  reversed  the  ruling  of 
the  lower  court  on  the  point  of  constitutionality.  It, 
however,  made  such  a  vitally  important  distinction 
between  the  ownership  and  the  transportation  of  coal, 
that  the  commodity  clause  of  the  Hepburn  Bill  became 
ineffective.  This  decision  of  the  Supreme  Court  was 
not  to  be  final.  In  April,  191 1,  the  court  made  a  new 
interpretation  of  the  clause,  and  ruled  that  a  railway 
company  may  not  use  its  stock  ownership  in  a  coal 
company  in  such  a  manner  as  practically  to  defeat  the 
commodity  clause.*  This  decision  means  that  the 
railway  must,  in  actual  fact,  as  well  as  in  theory, 
separate  itself  from  its  coal  company. 

The  Hepburn  Bill  more  completely  stated  and 
defined  the  powers  of  the  commission  over  rates.  The 
Maximum  Rate  decision  made  it  clear  that  the  com- 
mission did  not,  from  the  Act  of  1887,  possess  the 
power  over  future  reasonableness — it  could  only  de- 
clare a  certain  complained-of  rate  unreasonably  high. 
The  shipper  could  sue  for  the  excess,  in  case  the 
commission  decided  against  a  certain  rate,  but  he 
rarely  exercised  his  right  to  do  so.  The  process  was 
expensive  as  compared  with  the  amount  involved  in 
the  excess,  and  he  generally  shifted  it  to  the  ultimate 
consumer  of  the  goods.  To  bring  relief  to  the  shipper 
and  the  ultimate  consumer,  there  was,  after  much 
debate,  granted  to  the  commission  the  power  to  issue 
an  order,  in  which  reasonable  rates  were  prescribed  as 
the  maxima.  These  maxima  should  go  into  force 
within  thirty  days,  and  remain  for  two  years,  unless 

'  United  States  vs.  Delaware  and  Hudson  Company,  213  U.  S., 
366;  United  States  vs.  Lehigh  Valley  Ry.,  220  U.  S.,  257;  United 
States  vs.  Erie  Ry.,  220  U.  S.,  275. 


270  Railway  Transportation 

suspended  by  the  commission  itself  or  by  a  court. 
But,  since  such  an  order  might  be  suspended  or  set 
aside  by  the  Circuit  Court,  the  commission  was  greatly 
restricted  in  its  prescription  of  rates. 

The  hands  of  the  commission  were,  therefore, 
strengthened,  though  not  to  the  degree  that  was 
desired  by  the  general  public.  The  power  to  require 
complete  publication  of  rates  and  a  uniform  system  of 
bookkeeping,  as  well  as  the  power  to  prescribe  certain 
maximum  rates,  enabled  the  commission  to  do  more 
effective  work  in  the  nation's  control  of  railway  trans- 
portation. Its  membership  was  also  enlarged  from 
five  to  seven,  with  terms  of  seven  years  instead  of  six, 
as  in  the  original  act. 

The  Hepburn  Bill  did  not,  however,  bring  full 
satisfaction  to  the  extreme  radicals.  They  would  not, 
in  fact,  be  pleased  with  anything  short  of  complete 
Congressional  maximum  rates.  Nor  did  it  satisfy  those 
conservatives,  who  thought  that  the  machinery  of 
control  would  not  be  complete  until  a  coiirt  of  com- 
merce or  transportation,  to  which  appeals  should  lie 
from  the  decisions  of  the  commission,  should  be  estab- 
lished. Demand  for  further  revisions  of  the  Interstate 
Commerce  Act  soon,  therefore,  became  pressing;  and 
this  was  met  by  the  passage,  in  June,  1910,  of  the 
Mann-Elkins  Act.  This,  like  the  Hepburn  Bill,  was 
only  an  amendment  to  the  Act  of  1887,  though  a 
comparatively  far-reaching  one.  The  Hepburn  Bill 
was  a  fundamental  revision,  the  Mann-Elkins,  a 
technical  and  detailed  one.  The  passage  of  the 
one  aroused  the  most  wide-spread  and  intense  public 
interest,  of  the  other,  very  Httle. 

The  Mann-Elkins  Act  extended  the  scope  of  the 


United  States  271 

jurisdiction  of  the  commission,  to  include  telegraph, 
telephone,  and  cable  companies.  The  Interstate 
Commerce  Commission  now  became  a  practical  public 
service  commission.  The  most  important  change  in 
the  scope  and  power  of  the  commission  was,  however, 
in  reference  to  the  long  and  short  haul.  The  phrasing 
of  this  clause  of  the  Commerce  Act  had  since  1887 
remained  imchanged,  but  its  efficacy  had  been 
greatly  limited  by  the  Supreme  Court  decision  in  the 
Alabama  Midland  case,  in  1897.  The  ruling  of  the 
court,  to  the  effect  that  competition,  rail  or  water,  at 
terminal  points  constituted  a  dissimilarity  of  condition 
and,  therefore,  justified  a  larger  charge  for  the  shorter 
than  for  the  longer  hatd,  severely  restricted  the  work 
of  the  commission.  While  the  effects  of  the  court 
decision  were  in  many  particulars  wholesome  and 
advantageous,  especially  in  the  Southern  territory, 
still  a  good  many  serious  abuses  arose  under  its  cover. 
Every  possible  pretence  of  the  existence  of  competition 
was  at  times  made  use  of  in  defending  discriminations 
in  rates  in  favour  of  the  shipper  located  at  the  com- 
petitive points.  The  railways,  under  the  protection 
of  the  court  decision,  made  too  serious  effort  to  pre- 
vent the  coming  of  the  distance  or  cost  principle  of 
rates. 

To  restore  the  "long  and  short  haul"  clause  to 
active  power,  was  now  the  great  task  of  Congress.  The 
senators  and  representatives  from  the  South  were 
enthusiastically  in  favour  of  its  restoration,  but  their 
influence  was  lessened  by  the  fact  of  the  "Solid  South  " 
in  politics.  But  for  the  aid  of  the  insurgents  of  the 
West  and  South-west,  where  the  "  basing-point "  sys- 
tem of  rate  making  was  also  to  an  extent  in  vogue,  the 


272  Railway  Transportation 

restoration  of  this  clause  would  have  failed.  Finally 
the  old  phrase  "under  substantially  similar  circum- 
stances and  conditions"  was  eliminated,  and  it  at  once 
became  illegal  for  a  railway  under  any  conditions  of 
traffic  to  charge  more  for  the  shorter  than  for  the 
longer  haul  over  the  same  line,  in  the  same  direction, 
and  at  the  same  time,  unless  with  special  permission 
of  the  commission.  The  railways  were  given  until 
February  17,  191 1,  to  decide  upon  their  course  of 
action.  The  commission  was  also  empowered  to  regu- 
late the  routing  of  shipment ;  the  clause  forbade  a  rail- 
way to  charge  more  for  a  through  rate  than  for  the 
sum  of  the  intermediate  local  rates. 

The  new  "long  and  short  haul"  clause  has  placed 
in  the  hands  of  the  commission  the  power  to  work  for 
the  distance  principle  of  rates  in  the  large  territory  of 
the  South  and  in  much  of  the  West.  It  will,  most 
probably,  allow  the  fewest  possible  deviations  from 
the  rule  of  a  distance  rate.  Actual  facts  of  traffic  will 
in  the  future,  as  they  have  in  the  past,  hold  a  place  in 
the  minds  of  the  commissioners.  The  important 
decision  of  July  24, 191 1,  in  the  Spokane-Reno-Pacific 
Coast  cases,  makes  it  clear,  however,  that  the  com- 
mission's "rule  of  reason"  will  follow  as  closely  as 
possible  the  distance  basis  of  rates.  And  the  time 
has  come  when  such  a  basis  may,  without  great 
hindrance  to  commercial  and  industrial  growth,  be 
applied  to  much  of  the  traffic  of  the  entire  United 
States.  The  change  from  the  value  of  service  basis 
to  a  cost  or  distance  basis  should,  nevertheless,  come 
very  slowly. 

For  the  protection  and  encouragement  of  water 
transportation,  and  really  in  connection  with  the  "long 


United  States  273 

and  short  haul"  clause,  the  new  act  provided  that  a 
railway  which  competes  with  a  waterway  may  not, 
without  a  hearing  before  the  commission,  increase  its 
rates.  It  has,  of  course,  the  perfect  right  to  decrease 
them,  even  to  the  point  of  driving  into  bankruptcy  its 
rival  water-carrier,  but  it  will  now  most  probably  not 
resort  to  such  a  measure. 

The  Mann-Elkins  Act  also  made  a  radical  change 
in  the  power  of  the  commission  to  prescribe  rates  or  to 
reject  those  made  by  the  carrier.  It  provided  that 
the  commission  should  hold  a  hearing,  as  to  the 
reasonableness,  upon  all  proposed  increases  in  rates; 
and  that,  pending  the  hearing,  the  commission  might 
suspend  the  operation  of  the  new  rates,  ordinarily  for 
not  longer  than  four  months  beyond  the  time  when 
they  should  be  effective  as  designated  by  the  carrier. 
If  the  hearing  cannot  be  completed  within  four 
months,  the  commission  may  suspend  the  operation 
for  six  months  longer.  The  commission  was,  of  course, 
empowered  to  condemn,  on  the  basis  of  unreasonable- 
ness, the  rates  which  go  into  operation  at  the  expiration 
of  the  ten  months,  since  it  had  the  right  to  judge  any 
rate,  however  long  in  operation,  unreasonable.  The 
carrier  was  required  to  bear  the  burden  of  the  proof 
of  the  reasonableness  of  any  increase  made  after 
January  i,  1910 — a  distinct  copy  of  the  British  Act 
of  1894. 

Since  the  passage  of  the  new  revision  of  the  National 
Commerce  Act,  the  commission  has  become  tremen- 
dously powerful  and  effective.  Its  functions  and 
powers  have  all  now  become  clear  and  definite.  It  no 
longer  must  sit  passively  waiting  for  complaints — and 

many  should  have  been  made  that,  because  of  the 
18 


274  Railway  Transportation 

expense  and  trouble,  were  not  made.  It  now  acts  of 
its  own  initiative;  and  it  acts  with  the  full  confidence 
of  certainty  and  power.  Within  the  short  period  of 
its  new  life,  it  has  handed  down  two  remarkable 
decisions.  On  February  23,  191 1,  it  decided  against 
the  carriers  in  both  the  Eastern  and  Western  cases. 
A  number  of  railways  had  in  the  latter  part  of  19 10 
proposed  increases  in  rates  in  the  territory  of  the 
"Official"  classification,  amounting  to  about  $27,000- 
000  yearly.  The  commission  refused  to  accept  the 
increases  and  ordered  the  railways  not  to  make  them. 
Certain  roads  in  the  Western  Trunk  Line  territory 
also  proposed  increases,  but  the  commission  refused  to 
accept  or  to  allow  them.  In  both  cases,  the  carriers 
were  required  to  cancel  all  their  proposed  increases; 
and,  in  both  cases,  the  commission  issued  a  decree 
that,  if  its  order  was  not  complied  with  by  March  10, 
191 1,  it  would  by  formal  order  put  the  existing  rates 
in  force  for  at  least  two  years.  Such  a  far-reaching 
decision  came  after  exhaustive  investigation  and  hear- 
ing, and  it  rested  upon  what  the  commission  thought 
to  be  the  fact  that  the  railways  had  not,  as  was  by  the 
law  required,  proved  the  necessity  of  their  proposed 
increases. 

The  second  important  decision  was  made  on  July 
24,  191 1,  in  the  Spokane-Reno-Pacific  cases.  These 
cases  in  the  transcontinental  traffic  had  been  pending 
for  many  years.  The  commission  in  this  decision 
took  at  once  a  tremendous  step  toward  the  abolition 
of  the  "blanket"  or  " basing-point "  system  of  rate 
making,  and  towards  the  institution,  on  a  very  large 
scale,  of  a  practical  distance  rate,  after  the  manner  of 
the  zone  system  of  some  of  the  continental  coimtries. 


United  States  275 

Another  important  change  was  made  by  the  Mann- 
Elkins  Act.  A  Commerce  Court  was  created,  as  a 
court  to  which  appeals  should  go  from  the  decisions  of 
the  commission,  and  which  should  enforce  its  orders 
in  case  of  a  request  from  the  commission.  It  had  for 
a  number  of  years  been  thought  that  such  a  body  was 
necessary  to  complete  the  machinery  of  the  nation's 
control  over  interstate  traffic.  The  regular  circuit 
courts  were  too  busily  engaged  with  many  other  duties 
to  give  the  most  expert  thought  to  transportation 
problems  and  laws.  The  Commerce  Court  was 
created  for  the  purpose  of  bringing  relief  to  the  circuit 
courts,  and  also  of  providing  for  the  specialisation 
along  the  line  of  transportation  law. 

The  new  court  was  made  to  consist  of  five  members, 
who,  when  not  engaged  on  transportation  problems, 
were  to  serve  as  additional  circuit  judges.  The  first 
members  were  appointed  by  the  President  for  terms 
of  one,  two,  three,  four,  and  five  years  respectively. 
All  vacancies  are  to  be  filled  by  the  Chief  Justice  of  the 
Supreme  Court,  from  the  Circuit  Court  judges,  for 
terms  of  five  years.  The  act  provided,  unfortunately 
we  think,  that  after  1914  no  judge  can  be  designated, 
from  the  Circuit  Court,  to  serve  on  the  Commerce 
Court,  except  after  an  interval  of  one  year. 

The  Commerce  Court  was  assigned  the  following 
exclusive  jurisdiction:  (i)  in  all  cases  in  which  the 
enforcement  of  an  order  of  the  commission  is  involved, 
other  than  for  the  payment  of  money  or  the  infliction 
of  criminal  punishment ;  (2)  in  all  cases  to  enjoin  or  set 
aside  the  order  of  the  commission;  (3)  in  all  suits 
arising  under  the  Elkins  Act  to  enjoin  illegal  dis- 
criminations or  deviations  from  published  rates;  (4) 


276  Railway  Transportation 

in  all  suits  asking  for  the  issuance  of  writs  of  manda- 
mus to  require  the  filing  of  records  and  the  keeping  of 
accounts  in  the  manner  prescribed  by  the  commission. 

What  this  new  court  will  achieve  in  the  solution  of 
interstate  traffic  problems  remains,  of  course,  for  the 
futiure  to  know.  There  is,  however,  every  reason  to 
think  that  a  body,  endowed  with  the  powers  which  it 
possesses,  and  composed  of  the  members  which  Presi- 
dent Taft  has  wisely  appointed,  will  do  much  to 
strengthen  the  nation's  control  over  railways.  And 
there  is,  of  course,  always  above  this  the  great  and 
efficient  power  of  the  Supreme  Court. 

One  thing  seems  most  clear,  that  the  people  of  the 
United  States  have  constructed  a  great  and,  upon  the 
whole,  efficient  system  of  railway  transportation,  and 
that  they  have  gradually  but  certainly  created  an 
efficient  machinery  of  its  control.  This  system  of 
transportation  and  its  control  could  not,  we  think, 
possibly  be  more  efficient  if  under  state  management ; 
it  might  be  far  less. 

References  on  the  Railways  of  the  United  States 

(See  note  to  References  to  Chapter  I.) 

Interstate  Commerce  Commission:  (i)  A  Forty -Year  Review 
of  Changes  in  Freight  Tariffs,  1903;  (2)  Annual  Reports,  1887- 
1910;  (3)  Annual  Reports  of  the  Statistics  of  Railways,  1887-1910, 
Washington. 

Senate  Committee  on  Interstate  Commerce:  Hearings  on  the 
Regulation  of  Railway  Rates,  5  vols.,  and  a  Digest,  1906,  Wash- 
ington. 

Beale  and  Wyman:  The  Law  of  Railroad  Rates  Legislation, 
1906,  Boston. 

U.  S.  Commissioner  of  Corporations:  Transportation  by  Water 
in  the  United  States,  1909-10,  Washington. 


United  States  277 

Johnson  and  Huebner:  Railroad  Traffic  and  Rates,  2  vols.,  191 1, 
New  York. 

E.  R.  Johnson:  American  Railway  Transportation,  1908,  New 
York. 

B.  H.  Meyer:  Railway  Legislation  in  the  United  States,  1903, 
New  York. 

L.  G.  McPherson:  Railroad  Freight  Rates  .  .  .  ,  1909,  New 
York. 

W.  C.  Noyes:  American  Railroad  Rates,  1906,  Boston. 

W.  Z.  Ripley:  Railway  Problems,  1907,  Boston, 

L.  H.  Haney:  A  Congressional  History  of  Railways  in  the 
United  States  .  .  .,  2  vols.,  1906-10,  Madison. 

J.  M.  Clark:  Standards  of  Reasonableness  in  Local  Freight 
Discriminations,  19 10,  New  York. 

Quarterly  Journal  of  Economics:  Papers  by  M.  B.  Hammond  on 
"  Railway  Rate  Theories  of  the  Interstate  Commerce  Commis- 
sion," 1910-1 1,  and  by  F.  H.  Dixon  on  the  "  Interstate  Commerce 
Acts  of  1906  and  1910,"  1906,  1910. 

Railroad  Gazette,  New  York. 

Archiv  fiir  Eisenbahnwesen,  Berlin. 

Poor's  Manual  of  Railroads,  New  York. 

A.  vonderLeyen:  Die  Nord  Amerikanischen  Eisenbahnen,  1885, 
Leipzig. 

A.  von  der  Leyen:  Die  Finanz-  und  Verkehrspolitik  der  nord- 
amerikanischen  Eisenbahnen,  1895,  Berlin. 

P.  F.  Kupka:  Die  Verkehrsmittel  in  den  Vereinigten  Staaten  von 
Nord  Amerika,  1883,  Leipzig. 

Lavoinne  et  Pontzen:  Les  Chemins  de  Fer  en  Amerique,  2  vols., 
1880-82,  Paris. 

M.  Chevalier:  Histoire  et  Description  des  Voies  de  Communica- 
tion aux  Etats-Unis  .  .  .,  2  vols.,  1840-41,  Paris. 

H.  S.  Tanner:  A  Description  of  the  Canals  and  Railroads  of  the 
United  States,  1840,  New  York. 


CHAPTER  XVII 

STATE  OPERATION  OF  RAILWAYS 

IT  is  so  easy  to  be  partisan  and  dogmatic  in  a  dis- 
cussion of  the  state  management  of  railways,  that 
we  hestitate  to  enter  upon  it.  Nothing  short  of  the 
conviction  that  our  study  of  the  actual  experiences  of 
railways  in  a  number  of  the  leading  countries  has  some 
light,  however  small,  to  throw  upon  this  most  vital 
question,  would  cause  us  to  consider  it. 

The  Reasons 

.The  policies  of  the  various  governments  toward  the 
railways  have  been  very  different,  and  for  essentially 
different  reasons.  In  no  country  has  there  been  one 
single  reason  for  state  management,  or  for  private 
management.  The  reasons  have,  in  fact,  not  been 
simple  or  very  clear.  Political  and  social  reasons 
have  been  the  more  prominent  in  some  instances, 
perhaps  in  all  instances  of  state  ownership  and  opera- 
tion. It  is  difficult  to  understand  the  institution  of 
state  railways  on  the  basis  of  purely  economic  reasons, 
though  these,  to  be  sure,  must  play  a  considerable  part. 
In  their  beginnings,  the  relative  financial  ability  of 
the  public  treasury  or  of  private  enterprise  had  much 
to  do  with  the  policy  as  to  whether  the  railways  should 

be  state  or  private. When  the  German  states  entered 

278 


State  Operation  of  Railways      279 

upon  the  policy  of  a  practical  government  monopoly 
of  railway  ownership  and  management,  the  relative 
financial  status  had  come  to  be  of  slight  importance; 
the  state  treasury  could  bear  the  burdens,  or  private 
capital  might  without  aid.  State  operation  when  it 
first  came  on  a  large  scale  in  Germany  was  in  no 
respect  essentially  different  from  that  of  the  com- 
panies. There  were,  to  be  sure,  defects  and  abuses 
in  private  management,  but  these  could  have  been 
eliminated  by  an  efficient  machinery  of  state  regula- 
tion. In  1905,  when  the  Italian  state  resumed  the 
management  of  the  railways,  public  finance  in  Italy 
was  most  certainly  not  in  a  particularly  favourable 
condition;  and  the  government  was  almost  wholly  to 
blame  for  the  existence  of  the  inefficiency  in  the  opera- 
tion of  the  big  companies.  In  both  instances  the 
fundamental  force  was,  we  think,  a  political  and  social 
ambition — an  ambition  on  the  part  of  the  government, 
which  in  Germany  was  largely  the  kingship,  in  Italy  a 
socialistically  inclined  Parliament,  to  play  a  larger  r61e. 
In  Belgium,  the  desire  of  the  administration, 
whether  of  an  absolute  King  or  of  a  fairly  liberal 
Parliament,  to  be  important  in  all  the  phases  of  econo- 
mic life,  and  to  be  independent  of  private  capital, 
notably  that  of  the  Dutch,  has  caused  the  state  to 
play  the  master's  part  in  railway  operation.  France, 
which  has  until  the  present  remained  largely  a  coun- 
try of  private  management,  has  practically  from  the 
beginning  meant  to  have  a  government  monopoly  of 
railway  operation  at  some  future  date.  It  has  been 
practical  expediency  that  has  put  off  to  a  compara- 
tively distant  time  the  realisation  of  the  state's 
ambition  to  control  the  railways  through  their  opera- 


28o  Railway  Transportation 

tion.  In  Austria,  the  policy  of  the  state  has  been 
vacillating  between  social  desire  and  economic  and 
financial  conditions. 

Great  Britain  has,  on  the  other  hand,  had  a  clearly 
consistent  policy  of  a  purely  private  railway  both  as  to 
ownership  and  management ;  and  in  the  United  States, 
though  the  policy  has  not  been  so  remarkably  clear 
and  distinct  as  in  the  United  Kingdom,  private  enter- 
prise has  been  the  master,  though  it  has  received 
considerable  aid  from  the  state,  both  in  the  form  of 
ownership  and  operation.  In  both  countries,  political 
and  social  ambition  has  not,  until  very  recently  at 
least,  been  so  great  and  masterful,  and  private  enter- 
prise has  been  allowed  to  create  and  to  manage  railway 
transportation  on  a  vast  scale. 

When  the  railway  came  as  a  new  and  revolutionary 
institution,  the  idea  of  state  performance  of  certain 
services  that  were  largely  universal  was  already  in  the 
process  of  formulating.  The  government  held,  in  all 
the  countries,  within  its  administration  the  postal 
service ;  and  in  some  countries,  that  of  the  canals  and 
highways.  That  there  should  have  come  to  the  minds 
of  not  a  few  a  definite  theory  of  state  railways,  was, 
therefore,  very  natural,  even  though  the  practical 
conditions  were  such  as  to  make  it  inexpedient  for  the 
theory  to  become  operative  for  many  years.  In  those 
coimtries  in  which  the  highway  was  partly  private — 
exclusively  so  as  to  operation — and  the  canals  largely 
so,  it  was,  on  the  other  hand,  equally  natural  that  the 
theory  shoiild  have  been  in  favovu*  of  a  private  railway 
management. 

Prior  to  1830  the  public  treasury  was  almost  every- 
where none  too  large  for  the  government  to  perform 


State  Operation  of  Railways      281 

its  protective  functions,  to  say  nothing  of  the  develop- 
mental. To  carry  on  its  wars  and  to  punish  the 
offences  committed  against  the  state  and  against  the 
rights  of  its  citizens,  was  even  a  heavier  burden  than 
the  public  treasury  could  efficiently  carry.  To  spend 
from  public  funds  for  the  creation  and  maintenance 
of  the  postal  system,  though  this  was  comparatively 
simple  and  inexpensive,  was  as  much  as  most  of  the 
states  could  then  do.  The  developmental  function — 
that  of  the  state's  creation  and  maintenance  of  indus- 
trial and  commercial  conditions  and  factors  was, 
therefore,  little  appreciated  in  most  of  the  coimtries 
prior  to  the  coming  of  the  railway. 

The  developmental  function,  when  once  known  and 
appreciated,  had  a  rapid  growth,  until  it  came  to  rank 
with  the  older  function  of  protection.  In  the  philoso- 
phy of  social  development  was  grounded  the  theory 
of  state  railways  and  of  state  aid  to  private  railways. 
Upon  this  same  philosophy  was  supported  the  theory 
of  a  more  active  regulation  of  all  private  enterprises, 
certainly  those  which,  like  the  railway,  contained  a 
large  element  of  a  public  nature.  Political  philosophy 
and  sociology  have  exercised  a  profound  influence  upon 
the  theory  of  the  state's  relation  to  the  economic  life 
of  the  individual.  In  their  name,  the  government 
must  play  the  leading  rdle,  either  in  the  management 
of  industry  or  in  its  control.  State  management  of 
the  railways  has,  under  their  powerful  impulse,  become 
a  most  active  principle.  The  state  line  has,  in  fact, 
grown  in  recent  years  more  rapidly,  the  private  line, 
less  rapidly.  In  most  of  the  continental  countries  the 
private  railway  has  come  to  be  comparatively  insignifi- 
cant in  its  mileage  and  its  traffic. 


282  Railway  Transportation 

The  scope  of  state  activity  in  the  field  of  business 
has  since  the  beginning  of  the  railway  ever  extended. 
In  its  marvellous  growth,  it  has  come  to  include  much 
of  the  express  business,  of  the  telegraph  and  telephone, 
and  of  the  railway.  It  has  at  times  come  to  make 
good  the  lack  of  private  capital  and  enterprise.  At 
other  times,  it  has  come  to  prevent  abuses  in  the 
private  management;  and  at  still  other  times,  and  we 
think  much  more  frequently,  in  the  name  and  for  the 
sake  of  the  ambition  of  the  state. 

Methods 

In  case  the  state  attempts  to  extend  its  activity  to 
the  direct  management  of  the  railway  business,  it  may 
adopt  either  of  three  principles  of  operation : 

(i)  To  obtain  revenue  for  the  public  treasury, 
from  the  profits. 

(2)  To  make  expenses  and  to  render  a  large  public 
service. 

(3)  To  render  the  maximum  public  service,  quite 
irrespective  of  the  revenue. 

Should  it  adopt  the  first  principle,  the  state  must 
follow  the  methods  of  operation  which  the  private 
railway  has  found  to  be  the  most  efficient — to  perform 
that  amount  of  service  and  in  such  a  manner,  that  will 
yield  maximum  net  earnings.  If  the  second  principle 
is  made  its  guide,  the  state  will  work  upon  the  basis  of 
cost — to  secure  sufficient  earnings  to  cover  the  cost  of 
operation.  It  may  make  the  effort  to  decrease  the 
cost,  or  it  may  attempt  to  increase  the  earnings.  To 
adopt  the  third  principle,  is  for  the  state  to  think 
solely  of  the  maximum  service,  and  to  make  good  the 


State  Operation  of  Railways      283 

deficit  of  operation  by  resorting  to  taxes  upon  the 
citizens. 

A  state  railway  has,  of  course,  the  freedom,  in  the 
abstract,  to  choose  either  of  these  three  methods  of 
management.  It  may,  as  the  public  school  has  most 
generally  done,  work  upon  the  principle  of  greatest 
service  to  the  public  quite  irrespective  of  the  cost. 
Railway  operation  is,  however,  so  enormously  compli- 
cated and  expensive,  that  it  is,  we  think,  unwise  and 
unfair  to  adopt  such  a  principle.  The  deficit  accruing 
from  such  a  method  of  management  would  mean  a 
tremendous  burden  upon  the  citizens  as  taxpayers, 
many  of  whom  would  not  receive  any  direct  benefits. 
The  public  school  is,  or  at  least  may  be,  of  universal 
use  to  the  taxpayers,  A  public  railway  cannot  be — 
at  least  cannot  be  until  every  citizen  has  a  railway 
service  equally  efficient  and  cheap. 

All  the  countries  that  have  as  yet  assumed  the 
management  of  railways,  whether  in  whole  or  in  part, 
have  clearly  seen  the  practical  inexpediency,  if  not 
impossibility,  of  the  third  method  of  operation.  They 
have,  in  theory,  all  adopted  the  principle  of  maximum 
profits,  though  in  actual  results  practically  all  of  them 
have  placed  themselves  in  close  affiliation  with  the 
principle  of  making  expenses,  if  not  indeed  of  operating 
at  a  net  loss. 

Rate  making  is  the  most  difficult  task  of  railway 
transportation,  and  consequently  the  state  finds  itself 
constantly  confronted  by  this  ever  serious  and  compli- 
cated problem — one  upon  which  the  success  of  any 
method  of  operation  depends.  The  private  railway 
has,  as  we  have  seen,  most  generally  followed  the 
principle  of  the  value  of  the  service,  or,  in  more  con- 


284  Railway  Transportation 

Crete  form,  what  the  traffic  would  bear,  in  its  rate 
making,  though  in  so  doing  it  has  taken  upon  itself  the 
task  of  solving  the  rate  problem  by  the  longest  and 
most  difficult  route.  It  has  followed  this  principle, 
because  it  is  upon  the  whole  the  one  that  makes 
possible  the  greatest  and  widest  development  of  traffic 
and  of  industries,  even  though  in  pure  theory  it  may 
not  be  at  some  points  the  fairest.  It  is  one  that  is  the 
guide  in  all  other  phases  of  private  businesSj  even  in 
most  of  the  phases  of  government  business.  It  rests 
upon  the  foundation  of  all  economic  life — relative 
value.  The  private  railway  has,  therefore,  made  the 
classifications  of  its  traffic  and  their  schedules  of  rates 
according  to  the  value  of  the  service  or  of  the  commod- 
ities; goods  have  in  their  classification  been  differen- 
tiated from  each  other,  and,  therefore,  in  their 
transportation  charges.  The  cost  of  the  service  has 
also,  as  we  have  seen,  played  an  important  supple- 
mentary part  in  the  r61e  of  the  private  railway. 

Rate  making  by  the  state  railway  has,  on  the  other 
hand,  followed  as  closely  as  possible  the  cost  of  service 
principle — a  system  much  easier  and  more  subject  to 
routine,  but  which  does  not  so  readily  adjust  itself  to 
the  practical  conditions  and  circvunstances  of  traffic 
and  industries.  In  abstract  theory,  it  is  more  just 
than  the  value  principle ;  and  the  state  shoiild  in  all  its 
acts  strive  for  the  greatest  possible  justice  to  all  the 
people  as  a  whole.  In  actual  practice,  the  cost  princi- 
ple of  transportation  rates  may  render  more  justice 
to  some  people,  but  it  may  severely  restrict  the  free- 
dom of  others  to  act,  to  buy,  and  to  sell,  in  the  widest 
possible  field.  In  its  efforts  to  abolish  abusive  dis- 
criminations in  rates,  it  may  prevent  those  discrimina- 


State  Operation  of  Railways      285 

tions  which  are  necessary  for  growth,  and  which  may 
be  defended  upon  the  basis  of  value.  The  state  rail- 
way may,  and,  we  think,  often  does,  in  its  efforts  to 
keep  rates  as  equitable  as  possible,  fail  to  pay  the 
necessary  attention  to  business  needs — fail  to  lower 
rates  in  order  to  secure  new  traffic  and,  therefore,  to 
stimulate  industries. 

The  private  railway  may  make,  and  often  has  made, 
serious  errors  in  estimating  the  value  of  its  service  or 
the  value  of  its  traffic;  and,  whenever  this  has  been 
done,  an  unnecessary  harm  has  been  inflicted  upon 
some  shipper.  Efficient  regulation  may,  and  does, 
correct  this  error  or  abuse,  as  may  be  brilliantly  seen 
in  the  recent  work  of  the  Interstate  Commerce  Com- 
mission. The  state  railway  may,  on  the  other  hand, 
place  a  serious  obstruction  to  the  growth  of  industry 
and  commerce,  and  for  this  error  or  abuse  there  is,  we 
think,  practically  no  relief.  The  shipper  may  appeal 
to  Parliament  or  Congress,  but  the  Legislature  has  not 
been  able  to  bring  relief,  and,  we  think,  cannot.  The 
worst  possible  condition  for  the  shipper  exists  when 
transportation  rates  become  the  vital  question  of 
partisan  politics. 

We  have  so  far  assumed  that  any  form  of  govern- 
ment may  operate  the  railways  with  equal  efficiency, 
but  this  assumption  needs  the  most  severe  limitation. 
What  we  have  said  applies  to  such  a  brilliantly  effi- 
cient administration  as  that  of  Prussia,  in  which  merit, 
rather  than  partisan  politics,  is  the  dominant  factor. 
It  does  not  apply  to  the  same  degree  to  Italy,  France, 
Belgium,  and  Austria.  It  applies  to  a  state  whose 
administration  is  highly  centralised,  powerful,  and 
inteUigently  efficient,  not  to  one  whose  officials  have 


286  Railway  Transportation 

terms  of  office  depending  upon  the  vacillating  notions 
of  a  people.  It  is  impossible  for  us  to  think  of  the 
British  Parliament  or  of  the  American  Congress  per- 
forming successfully  the  vastly  compUcated  task  of 
operating  the  railways,  however  much  we  admire 
these  bodies  in  their  ordinary  capacity.  The  British 
and  the  American  administrations  are  by  far  too 
divided  and  too  changeable  to  perform  effectively  a 
task  which  always  imperatively  demands  centralisation 
and  permanence.  We  would  not  desire  to  transform 
the  British  and  the  American  systems  of  government 
into  the  Prussian  form,  far  from  it.  We  merely  wish 
that  these  two  states  should  not  attempt  a  business 
task,  for  which  they,  from  the  very  nature  and  theory 
of  their  organisation,  have  little  capacity  to  perfoim. 

History 

To  trace  the  history  of  the  nationalisation  of  rail- 
ways and  of  the  methods  of  their  management  with 
great  detail  is,  of  course,  beyond  the  scope  of  this 
chapter.  Its  details  are  very  voluminous  and  often- 
times not  particularly  illuminating.  We  have,  more- 
over, already  considered  those  which  belong  to  France, 
Italy,  and  Germany.  We  shall,  therefore,  give  in  this 
connection  only  some  of  the  more  significant  facts  out 
of  the  experiences  of  state  railways. 

Great  Britain  and  the  United  States  have  the  only 
great  and  distinguished  examples  of  the  private  rail- 
way in  the  world.  Great  Britain  has  the  private 
railway  at  home,  but  not  to  a  great  extent  in  her 
provinces;  her  sons  and  daughters  have  quite  largely 
followed  in  the  world  movement  of  nationalisation. 


State  Operation  of  Railways       287 

There  are,  at  present,  approximately  180,000  miles  of 
state  railways  in  the  world,  while  the  mileage  of  the 
private  railways  ranges  near  420,000.  The  state  net 
of  the  world  includes,  therefore,  practically  30%  of  the 
total  mileage.  Of  this  large  net,  we  shall  consider 
here  only  that  of  Belgium,  Austria,  Italy,  France,  and 
Germany — countries  whose  experiences  have  been,  to 
say  the  least,  as  favourable  as  the  average  of  all  the 
state  net  of  the  world,  perhaps  much  more  favourable 
than  the  average. 

(/)  Belgium 

The  creation  of  a  state  net  began  in  Belgium  at  the 
beginning  of  her  railways,  almost  at  the  birth  of  her 
national  independence.  Political  independence  of 
Holland  was  achieved  in  1830,  and  the  railways,  which 
were  to  be  fundamental  in  Belgian  life,  must  be 
independent  of  Dutch  capital.  The  Belgian  citizen 
was  then  poor,  and  there  was,  therefore,  little  surplus 
Belgian  capital  that  could  go  into  the  new  form  of 
transportation.  Railway  building  by  the  state  began 
in  1834-35.  Concessions  for  private  lines  were  not 
made  until  1840.  The  new  government  was  strong, 
progressive,  and  efficient.  Centralised  sufficiently  to 
be  efficient  as  a  railway  builder  and  manager,  it  was 
not  too  autocratic  to  be  popular  with  the  people.  It 
chose  for  its  first  lines  the  chief  courses  of  commerce, 
to  connect  the  centres  of  industry. 

In  1840  building  by  private  enterprise  had  its 
beginning,  and  by  1844  it  had  assumed  considerable 
activity.  It  could,  however,  construct  lines  only  in 
those  sections  which  the  state  did  not  desire  to  make 


288  Railway  Transportation 

use  of.  Competition  between  the  state  lines  and  the 
private  did  not,  for  a  time  at  least,  exist.  The  govern- 
ment net  had  a  monopoly,  and  for  a  period  it  used  it 
with  practical  sagacity.  Its  early  management  was 
efficient  and  entirely  open,  and  its  equipment  was 
excellent.  Such  a  policy  of  operation  continued  but 
for  a  short  time.  By  1848-50,  the  state  railway  was 
no  longer  vigorous  or  efficient.  Though  the  net  was 
comparatively  complete,  its  management  was  sluggish. 
It  paid  little  attention  to  the  development  of  traffic. 
It  provided  no  efficient  system  of  classifications  and 
rates.  The  private  lines  were,  on  the  other  hand, 
becoming  numerous  and  active,  notably  so  after  1850. 
They,  by  consolidations  and  by  pools,  made  them- 
selves into  powerful  and  keen  competitors  of  the  state 
net,  even  though  they  operated  in  a  territory  which 
was  by  no  means  so  favourable  for  traffic  as  that  of  the 
state  lines.  Their  mileage  increased  from  less  than 
200  in  1850  to  about  1500  in  1870,  while  the  state 
mileage  remained  without  important  additions;  it 
was  only  535  in  1870.  With  such  inactivity  on  the 
part  of  the  state  system,  and  with  much  progressive- 
ness  on  the  part  of  the  companies,  rate  wars  naturally 
brought  confusion  and  disaster  to  the  state  manage- 
ment, as  well  as  many  abusive  discriminations  in 
rates.  The  state  net,  under  the  force  of  such  competi- 
tion, was  guilty  of  all  the  abuses  of  discriminations 
that  rate  wars  bring. 

Such  a  condition  could  not  last  long.  The  state  net 
was  weak,  and  the  government  exercised  no  control 
over  the  operation  of  the  private  lines.  The  state 
must  again  become  aggressive,  or  retire  from  the  field 
of  management.     It  again  took  on  new  vigour  in 


State  Operation  of  Railways       289 

railway  construction,  particularly  in  the  purchase  of 
its  rival  lines.  By  1875  the  state  system  contained 
more  than  one-half  of  the  entire  Belgian  mileage  and 
by  1885,  practically  three-fourths.  In  1870  it  adopted 
the  policy  of  a  practically  complete  nationalised  sys- 
tem; it  has  since  that  date  made  no  concessions  of 
rights  to  private  enterprise.  The  problems  of  traffic 
and  rates  were  again  considered  with  earnestness  and 
accuracy.  The  rates  became  less,  and  the  service, 
more  efficient.  Its  passenger  rates  were  reduced  to  a 
point  lower  than  perhaps  anywhere  else  in  the  world. 
Its  freight  rates  were  made  lower  than  elsewhere  in 
Europe.  The  classification  of  its  traffic  was  done  with 
comparatively  great  fairness. 

The  growth  of  the  Belgian  state  net  has,  therefore, 
upon  the  whole  been  slow,  notably  so  until  after  1870. 
A  clearer  view  of  its  growth  may  be  seen  in  the  kilo- 
metric  figures  at  representative  dates: 

1835 135     kilometres 

1845 559.8 

1855 652.4 

1865 749.2  " 

1875 1966.5 

1885 3173.1 

1895 3298.8 

1907 4271.8  " 

The  figures  of  1907  included  178.7  kilometres,  which 
were  purchased  by  the  state  in  1906,  and  which  were 
not  taken  into  the  state  net  of  operation  until  1908. 
The  private  lines  amounted  in  1870  to  2431  kilometres, 
the  state,  863.  By  1907  the  private  lines  had  decreased, 
to  587.29  kilometres  (344  miles),  178.7  kilometres  of 

19 


290  Railway  Transportation 

which  had  already  been  purchased  for  the  state  net. 

What  have  been  the  methods  of  operation?  What 
their  results?  The  state's  management  has  been,  as 
we  have  seen,  unequally  efficient.  Its  lines  had  from 
the  beginning  a  large  and  steady  volume  of  traffic. 
The  local  traffic  for  them  was  certain,  and  they  might 
haul  much  of  the  international  traffic,  provided  only 
they  could  offer  the  service  at  a  rate  sufficiently 
attractive  to  secure  it  from  the  competition  of  the 
German,  French,  or  Dutch  lines,  or  that  of  the  great 
waterway  the  Rhine.  Belgium  really  held  in  her 
hands  the  key  to  the  commerce  of  Northern  and 
Middle  Europe.  The  financial  returns  should,  there- 
fore, have  been  unusually  favourable.  Have  they 
been? 

This  is  a  very  difficult  question  to  answer  with 
exact  accuracy.  The  accounts  of  the  state  railways 
have  been  kept  in  such  a  manner,  that  it  is  difficult  to 
ascertain  whether  their  management  has  been  self- 
supporting,  or  has  entailed  a  net  expense  upon  the 
public  treasury.  State  management  has  certainly 
paid  more  than  the  expenses  of  operation  and  main- 
tenance. Has  it  paid  also  the  interest  on  the  railway 
debt  and  provided  a  fund  for  sinking  this  debt?  At 
times,  it  has  perhaps  provided  for  these  funds;  at 
other  times,  it  has  not.  If  we  take  the  year  1907  as  a 
test — and  that  was  certainly  up  to  the  average  in 
traffic  and  earnings, — we  find  that  the  net  loss  to  the 
public  treasury  was  as  much  as  6,578,832  francs,  not 
to  mention  the  loss  of  revenue  from  the  railway  prop- 
erty and  traffic  that  would  have  come  to  the  state  in 
taxes  had  the  railways  been  in  the  hands  of  companies. 

Have  the  operating  expenses  been  small?    This  is 


State  Operation  of  Railways      291 

most  clearly  answered  by  the  following  coefficients  of 
operation — the  ratios  of  operating  expenses  to  receipts : 

1835 62.68% 

1852 4746% 

1872 60.57% 

1882 62.59% 

1892 5927% 

1902 63.23% 

1907 69.40% 

The  operating  expenses  have  in  recent  years  in- 
creased more  rapidly  than  the  income,  and  still  the 
employees  have  not  received  much  larger  wages. 
Their  wages  are,  in  fact,  comparatively  low.  Their 
feelings  of  loyalty  are,  therefore,  not  particiilarly 
intense. 

The  Belgian  state  management  has,  we  feel  reason- 
ably sure,  not  upon  the  whole  paid  all  the  expenses; 
and  its  cost  of  operation  has  been  relatively  high — 
much  higher  than  on  the  British  lines.  Have  these 
conditions  been  offset  by  very  low  rates?  Forj3,_. 
number  of  years  the  rates  on  the  state  lines  were  high. 
They  did  not  become  low  until  the  period  of  great 
competition  between  them  and  the  private  lines,  1857- 
70.  Since  1870,  when  the  state  again  became  domi- 
nant, the  rates  on  the  government  lines  have  continued 
comparatively  low,  notably  so  on  the  international 
traffic.  In  pursuing  this  policy  of  low  rates,  the 
Belgian  government  has  perhaps  made  its  income 
from  railway  management  subservient  to  the  gain 
which  has  come  indirectly  through  a  large  volume  of 
shipping.      The  development  of  Belgian  industries 


292  Railway  Transportation 

and  commerce,  rather  than  the  making  of  expenses  or 
profits,  has  perhaps  during  the  last  forty  years  been 
the  method  of  operation  deUberately  chosen  by  the 
state. 

(2)  Austria 

In  Austria  the  building  of  a  state  railway  net  has 
been  a  more  difficult  task  than  in  Belgium.  The  rail- 
way came  to  Austria  almost  as  early  as  anywhere  in 
the  world.  The  chief  officials  were,  however,  opposed 
to  the  policy  of  state  management,  though  they  were 
willing  to  allow  some  government  aid  to  railway 
construction.  During  the  first  decade,  1832-42,  pri- 
vate enterprise  alone  built  and  operated  the  lines.  The 
state  did  not  enter  upon  a  course  of  railway  construc- 
tion until  1842,  and  it  did  not  become  very  active  for 
many  years.  The  revolution  of  1848  and  the  Hunga- 
rian Wars  so  completely  absorbed  the  funds  in  the 
public  treasury,  that  little  was  left  for  the  state  to  use 
in  the  performance  of  the  developmental  function. 
There  came,  in  fact,  by  1854-55  a  reverse  in  the  policy 
of  state  railways.  The  financial  conditions  of  the 
treasury  were  far  from  satisfactory,  and  the  influence 
of  France,  which  was  making  conventions  with  big 
companies,  instead  of  operating  railways  by  the 
government,  was  very  important.  The  state  now, 
for  fiscal  and  political  reasons,  sold  its  lines,  even  at 
the  sacrifice  of  half  the  cost  of  their  building,  or  leased 
them  to  companies.  The  private  railway  was  now 
dominant;  the  government  gave  it  liberal  rights  and 
privileges,  as  well  as  made  it  guarantees  of  interest  on 
its  shares. 


State  Operation  of  Railways       293 

While  the  period  1854-75  was  one  of  no  activity  on 
the  part  of  the  state  towards  a  government  net,  and 
while  the  government  rendered  considerable  aid  to  the 
companies,  still  the  private  lines  did  not  prosper.  The 
Austrians  were  as  yet  very  sluggish  in  their  industrial 
development.  For  many  years  their  administration 
had  been  illiberal;  their  government,  as  well  as  their 
economic  life,  was  still  largely  mediaeval.  The  rail- 
ways had,  therefore,  little  traffic,  and  the  competition 
which  they  must  meet  was  vigorous.  The  great 
Danube  was  yet  the  master  of  interior  transportation. 

The  fact  of  the  lack  of  prosperity  to  the  private 
railways,  connected  with  the  lessons  of  the  Prussian 
War  of  1866  and  of  the  economic  crisis  of  1873,  meant 
a  revival  of  the  state  net.  The  state  was  again,  by 
1877,  active  as  a  builder  of  railways,  and  its  activity 
has  since  that  date  continued  to  the  present.  The 
government  lines  have  come  to  be  the  controlling  fac- 
tors in  Austria's  transportation. 

'  The  policy  of  the  state  has,  therefore,  been  a 
vacillating  one,  as  may  be  clearly  seen  in  these  per- 
centages of  the  state  mileage  to  the  total: 

1840 0% 

1845 47.39% 

1850 61.38% 

1855 32.68% 

i860 0.44% 

1870 0.21% 

1875 1.11%  (of  a  total  of  10,331  km.) 

1880 17.23% 

1885 38.60% 

1890 43.51% 


294  Railway  Transportation 

1895 53-50% 

1906 67.95%  (of  a  total  of  21,594  km.) 

The  state  management  has  since  1885  adopted  the 
method  of  rendering  service,  rather  than  of  securing 
maximimi  profits.  Its  purpose  has  been  to  develop 
industries  and  to  cement  a  most  diversified  nation 
into  a  unified  whole.  Its  lines  have  since  1895  been 
sufficiently  important  to  place  it  in  the  position  of  the 
master  in  rate  making  for  all  the  mileage ;  the  private 
lines  have  not  been  strong  enough  in  their  competition 
to  enable  them  to  exercise  much  power.  Under  the 
influence  of  such  a  method  of  management,  the  net 
earnings  of  operation  over  the  expenses  of  operation 
and  maintenance  could  not  be  large.  They  were 
2.2%  in  1903,  2.38%  in  1904,  2.85%  in  1906,  and 
3.01%  in  1907.  The  expenses  of  operation  and  main- 
tenance did  not  include  those  of  interest  on  the  railway 
debt  (state  debt)  or  of  a  sinking  fund  for  its  ultimate 
settlement.  These  together  made  percentages  con- 
siderably larger  than  those  of  the  net  earnings  of 
operation  over  operating  expenses.  The  state  manage- 
ment of  railways  has,  therefore,  not  made  its  expenses, 
and  the  public  treasury  has  had  to  bear  a  considerable 
burden  because  of  the  state  system  of  railways. 

Whether  this  burden  has  been  offset  by  the  cheap- 
ness of  service,  we  cannot  say  with  much  accuracy. 
There  have,  to  be  sure,  been  some  reductions  in  railway 
rates  during  the  last  quarter  of  a  century.  The 
average  receipts  per  ton  per  mile  for  all  the  Austrian 
lines,  state  and  private,  declined  during  the  decade 
1880-90  from  practically  i  .81  cents  to  i  .39 ;  the  decline 
from  1890  to  1902  was  slighter,  from   1.39  to  1.26 


State  Operation  of  Railways        295 

cents.  In  a  few  instances  the  rates  of  the  private 
lines  have,  according  to  their  charter  maxima,  been 
higher  than  those  of  the  state,  but  generally  they  have 
not.  The  freight  rates  of  the  state  system  have, 
therefore,  not  been  particularly  low.  They  have,  in 
fact,  been  much  higher  than  in  the  United  States, 
though  the  character  of  the  traffic  of  the  two  countries 
has  had  much  in  common.  Both  have  had  a  large 
volimie  of  the  low  grade  commodities.  It  would, 
therefore,  seem  to  be  fair  to  say  that  the  Austrian 
state  service  has  not  been  notably  successful  in  its 
cheapness. 

It  is  difficult  to  compare  state  operation  in  Austria 
with  the  private.  The  costs  of  construction  and 
operation  and  the  conditions  of  traffic  have  been 
materially  different.  If  we  take  four  private  lines 
that  have  not  called  upon  the  state  for  their  guarantees 
of  interest,  as  the  representatives  of  the  British  Board 
of  Trade  did  when  they  made  their  investigations,  we 
.find  that  one  of  them  earned  during  the  period  1902- 
06  no  dividends  on  its  capital,  one,  from  4%  to  5.25%, 
one,  from  5.4%  to  6.6%,  and  one,  from  11%  to  12%; 
and  these  companies  paid  taxes  to  the  state. 

(3)  Italy 

The  experiences  of  state  management  in  Italy  have 
already  been  given.  It  is  sufficient  here  to  say  that 
this  management  never  had  anything  like  a  complete 
or  fair  test  until  in  1905.  To  pass  adequate  judg- 
ment upon  the  success  of  its  operation  for  so  short  a 
time,  is,  of  course,  impossible. 

It  was  necessary  for  the  newly  organised  administra- 
tion to  invest  largely  in  new  equipment,  and  this  it  did 


296  Railway  Transportation 

during  the  first  three  years  of  its  existence.  It 
increased  its  locomotives  from  2664  to  4053,  its 
passenger  coaches  from  7008  to  9073,  and  its  freight 
cars  from  50,924  to  78,660.  With  such  a  large  outlay 
made  during  the  short  space  of  three  years,  the  returns 
from  which  will  accrue  for  many  years  to  come,  it  is 
clearly  unfair  to  judge  of  the  efficiency  of  state 
management  solely  by  the  percentages  of  net  earnings 
of  operation  over  operating  expenses.  These  were  for 
1906-08  approximately  2.18%  on  the  capital  cost, 
and  for  1908-09  about  1.75%.  The  state  was,  how- 
ever, paying  practically  3.5%  on  the  railway  debt — 
a  net  loss  to  the  state  treasury  of  about  75,000,000- 
77,000,000  lire  a  year. 

The  exhibit  of  these  earnings  as  compared  with  those 
of  the  Mediterranean  Company,  which  for  1 885-1 901 
made  an  average  net  earning  of  5.15%,  for  1901-04, 
of  3-3%>  or  of  the  other  mainland  company,  the 
Adriatic,  which  made  for  these  same  periods  6.53% 
and  6%,  is  on  the  surface  most  unfavourable  to  state 
management.  It  should,  however,  be  noted  that  these 
companies  spent  little  for  equipment,  and  that,  while 
their  conventions  with  the  state  were  very  favourable 
to  themselves,  they  were  expensive  to  the  public 
treasury. 

State  management,  as  judged  by  its  expenses,  does 
not  make  a  favourable  showing,  as  may  be  seen  in 
these  coefficients  of  operation: 


1905-06 64% 

1906-07 73% 

1907-08 74% 

1908-09 78% 


State  Operation  of  Railways      297 

These  ratios  of  operating  expenses  to  income  are 
very  high,  but  they  must,  of  course,  be  considered  in 
connection  with  the  conditions  of  operation  and  main- 
tenance, as  well  as  of  traffic.  The  cost  of  operation 
and  maintenance  must,  from  the  very  nature  of  much 
of  the  territory  through  which  they  operate,  be  large ; 
and  the  traffic  is  as  yet  comparatively  slight,  however 
favourable  be  the  policy  of  the  railways  toward  the 
shippers. 

State  management  in  Italy  has,  therefore,  not  yet 
proven  its  success  in  terms  of  its  net  earnings.  Has  it 
in  terms  of  its  rates?  Has  it  materially  changed  the 
method  of  operation  from  that  of  maximum  profits  to 
that  of  maximum  service?  Its  passenger  charges  have 
upon  the  whole  had  no  substantial  reductions,  except 
for  the  long  journeys.  Its  freight  rates  have  had 
practically  no  reduction,  as  may  be  seen  in  the  average 
receipts  per  ton  per  mile.  They  were  1.97  cents  in 
1880,  1.64  in  1890,  1.57  in  1899,  and  1.56  in  1908. 

(4)  France 

The  government  in  France  has  as  yet  taken  no 
prominent  part  in  railway  operation.  It  has  from  the 
beginning  been  deeply  involved  in  railway  construc- 
tion, though,  with  the  exception  of  the  period  1878-83, 
it  has  shown  its  activity  in  the  aid  that  it  has  rendered 
the  companies.  The  first  net  for  operation  was 
acquired  in  1877,  when,  largely  because  of  the  utter 
inability  of  some  small  companies  to  operate  the  lines 
successfully,  the  state  purchased  2600  kilometres,  in 
South-western  France.  The  state  net  grew  very 
little,  with  the  exception  of  the  period  1878-83,  when 
by  purchase  and  construction  it  acquired  practically 


298  Railway  Transportation 

12,400  kilometres,  all  of  which  was  transferred  to  the 
big  companies  by  the  conventions  of  1883,  until  1908- 
09.  It  contained  but  2990  kilometres  at  the  beginning 
of  1909.  Now  the  Western  Company's  lines  of  5965 
kilometres  were  added  by  purchase.  Five  of  the  big 
companies  were  now  left,  and  they  had  by  far  the 
greater  part  of  the  mileage.  The  state  net  in  1909 
consisted  of  8955  kilometres,  out  of  a  total  of  practi- 
cally 40,000  kilometres  of  the  lines  of  general  interest. 
According  to  the  conventions  of  1883,  these  five  com- 
panies will  go  out  of  existence,  and  their  lines  pass  into 
the  state  net,  between  1950  and  i960. 

When  the  state  in  1908-09  took  over  the  operation 
of  the  lines  of  the  Western  Company,  it  was  mani- 
festing no  aggressiveness  of  nationalisation.  This 
company  had  been  such  a  heavy  burden  to  the  public 
treasury,  in  its  large  calls  upon  the  government  for 
financial  assistance,  that  its  indebtedness  to  the  state 
had  become  larger  than  it  could  ever  repay. 

France  has,  therefore,  never  had  the  opportunity  to 
adopt  any  special  method  of  operation.  It  has 
managed  its  small  net  upon  the  principle  of  maximum 
profits.  It  has  never  reduced  its  rates  with  the  view 
of  maximum  service,  only  in  order  to  secure  more 
traffic  and  earnings.  Its  rates  have  not  upon  the  whole 
been  lower  than  those  of  the  companies.  Sometimes 
they  have  been  higher.  The  returns  from  the  opera- 
tion of  the  old  net  have  never  been  good.  The  traffic 
conditions  have  not  been  favourable,  and  the  most 
efficient  private  management  would  have  had  no  great 
prosperity.  Its  lines  have  been  located  in  a  poor 
region,  and  they  had  had  no  direct  connection  of  their 
own  with  the  heart  of  all  French  life — Paris.     The 


State  Operation  of  Railways       299 

new  net  has  been  under  state  control  for  too  short  a 
time  for  us  to  pass  any  judgment  upon  its  efficiency . 

(5)  Germany 

It  is  in  Germany,  especially  in  Prussia,  that  the 
policy  of  state  management  has  been  most  tritmiphant, 
though  in  Belgitmi  it  has  for  most  of  the  life  of  the 
railway  been  a  dominant  factor.  Prussia  is,  however, 
alone  in  her  great  financial  achievements  of  state 
operation.  The  fundamental  reason  for  the  institution 
of  the  state  railway  in  the  German  states  was  the 
ambition  of  the  political  and  social  forces;  and  this 
has  to  the  present  been  the  dominant  factor  in  state 
management,  though  financial  and  economic  forces 
have  been  influential,  particularly  in  the  management 
of  the  freight  service. 

In  Prussia  the  policy  of  state  railways  was  not  for 
a  good  many  years  clear  or  definite.  From  1838  to 
1842,  the  state's  relation  assimied  the  form  of  rigid 
regulation  of  the  private  railway,  and  of  occasional 
assistance  in  its  building  The  famous  law  of  1838 
clearly  expressed  this  form  of  the  state's  relationship 
to  the  railways.  During  the  next  nine  years  this 
relationship  was  in  the  process  of  changing  its  form, 
towards  that  of  state  management.  The  funds  of  the 
public  treasury  were  now  capable  of  rendering  much 
developmental  service.  The  state  was,  therefore,  to 
form  its  first  net;  by  1848  it  possessed  392  kilometres. 

It  was,  however,  during  the  period  1848-79  that  the 
philosophy  of  the  developmental  function  of  the  state 
crystallised  itself  in  the  form  of  the  state  management 
of  certain  services,  notably  that  of  transportation. 


300  Railway  Transportation 

The  policy  of  state  management  became,  under  the 
influence  of  this  social  and  political  philosophy,  a  clear 
and  vigorous  one.  The  formation  of  the  North 
German  Union,  in  1866-67,  added  to  its  vigour;  and 
the  creation  of  the  German  Empire,  in  1870-71,  made 
another  and  a  very  important  contribution  to  it. 
From  1873  to  1879  the  idea  of  a  large  private  railway 
was  permanently  abandoned  in  favour  of  a  great 
state  system. 

Since  1879  this  policy  has  come  to  almost  a  com- 
plete realisation  of  its  better  self.  During  the  period 
1879-95  the  Prussian  state  purchased  as  much  as 
14,273  kilometres ;  its  net  had  by  the  end  of  the  century 
grown  to  practically  31,000  kilometres,  and  by  1910, 
37,162.  In  1907  there  were  22,041  miles  of  state  rail- 
ways in  Prussia,  with  only  1490  of  private. 

This  statement  of  the  growth  of  the  state  railway 
net  in  Prussia,  though  very  brief,  tells  with  sufficient 
detail  of  a  wonderful  expansion  in  the  power  of  its 
administration.  A  similar  statement  might  be  made 
in  reference  to  the  nationalisation  of  the  railways  in 
other  German  states.  In  Bavaria,  for  instance,  the 
same  process  has  been  steadily  at  work.  The  develop- 
ment of  the  government  net  has  grown  from  164 
kilometres  in  1845  to  4295  in  1881,  to  7267  in  1910; 
and  at  this  latter  date  only  267  kilometres  remained 
in  the  hands  of  private  enterprise.  In  Saxony  the 
growth  has  been  similar  to  that  in  Bavaria.  The  first 
purchase  of  a  state  line  was  in  1847,  and  from  that 
date  to  1905  the  amount  bought  by  the  government 
was  1273.8  kilometres.  Only  six  miles  of  private  line 
remained  in  1 910.  In  1907-08  the  state  lines  in  all 
Germany  amounted  to  31,430  miles,  the  private  to 


State  Operation  of  Railways      301 

2469 — 92%  of  the  total  in  the  hands  of  the  govern- 
ments. 

What  of  the  methods  of  operation?  What  of  the 
financial  results?  The  principle  of  maximimi  public 
service  has  been  more  or  less  prominent  in  the  passen- 
ger department,  though  even  here  maximum  profits 
have  been  clearly  an  influential  factor  in  operation  and 
rate  making;  and  the  freight  service  has,  we  think, 
been  quite  largely  controlled  by  the  principle  of 
profits  for  the  sake  of  the  public  treasury.  We  should 
expect  to  find  that  the  net  earnings  have  been  at  least 
important,  if  not  indeed  large.  In  Bavaria  the  per- 
centages of  net  earnings  of  operation  over  operation 
and  maintenance  expenses  have  been  for  representa- 
tive years:  4.26  in  1890,  3.42  in  1895,  3.38  in  1900, 
and  3.71  in  1906.  From  these  percentages  must,  how- 
ever, be  deducted  the  interest  on  the  railway  debt, 
which  has  been  perhaps  as  much  as  3%  as  an  average. 
This  leaves  very  little  profits  to  the  public  treasury. 
In  Saxony  the  results  have  been  substantially  the 
same.  The  ratio  of  earnings  over  costs  of  maintenance 
and  operation  was  3.03  in  1901,  4.66  in  1904,  and  5.24 
in  1906.  Since  these  ratios  in  Saxony,  as  in  Bavaria, 
were  calculated  before  the  interest  on  the  railway 
debt  was  deducted,  little  has  been  left  as  net  profits  to 
the  state. 

The  Prussian  State  system  of  lines  has  made  the 
following  exhibit  of  operation  income  over  mainte- 
nance and  operation  costs,  as  expressed  in  its  percen- 
tages on  the  capital,  for  certain  representative  years: 

1854 2.21 

1870 6.25 


302  Railway  Transportation 

1879 452 

1890 5.26 

1895 6.75 

1900 6.87  (Prussian-Hessian) 

1905 713 

1909 5.94 

From  these  large  percentages  must,  as  in  the  case  of 
Bavaria  and  Saxony,  be  deducted  the  interest  on  the 
state  railway  debt  and  the  amount  of  the  fund  for  its 
ultimate  settlement — perhaps  on  an  average  of  as 
much  as  3.5%.  The  percentages  as  given  above 
represent  only  the  earnings  of  operation  over  main- 
tenance and  operation  expenses,  in  which  the  costs  on 
the  debt  are  not  included.  In  1899  the  state  railway 
debt  amounted  to  88.4%  of  the  total  Prussian  state 
debt,  in  1905,  82.38%,  and  in  1909,  74.72%.  After 
these  large  deductions  have  been  made,  the  net  profits 
from  the  railway  management  to  the  state  treasury 
seem  much  smaller.  The  lowest  per  cent,  of  income 
over  maintenance  and  operation  expenses  for  the 
period  1881-1906  was  4.86  (in  1883),  and  the  highest, 
7.13  (in  1905),  with  an  average  of  5.35%  for  1881-95 
and  of  7.08%  for  1 897-1 906.  After  the  deductions 
have  been  made,  the  average  net  profit  to  the  state 
treasury  is  about  2%  and  3.5%  for  the  respective 
periods.  It  is,  moreover,  probable  that  the  state 
would  have  received  almost  this  amount  from  taxes 
upon  the  property  and  operation  of  the  railways  had 
they  been  in  the  hands  of  companies. 

If  our  estimates  of  the  financial  returns  to  the  public 
treasury  from  state  management  be  correct,  and  we 
are  forced  to  think  them  substantially  so,  it  has  not 


State  Operation  of  Railways       303 

been  a  particularly  good  investment  to  the  German 
states  to  undertake  the  task  of  the  nationalisation  of 
their  railways,  unless  state  operation  has  meant  a 
more  efficient  and  a  cheaper  service  than  could  have 
been  secured  by  private  operation  under  state  super- 
vision.    What  of  the  service  and  rates? 

Their  passenger  service  has  been  cheap  and  efficientj^ 
but  pnvalebperatiori'in  the  United  States  has  supplied 
a  service  certainly  as  efficient  as  the  German  first  and 
second  class  and  hardly  as  expensive.  The  chargeior.. 
the  Prussian  first  class-service  is  considerably  higher 
than  that  in  the  United  States.  Its  second-class  rate 
is  approximately  1.7  cents  per  passenger  per  mile, 
while  the  American  average  for  the  first  class  is 
practically  2  cents.  The  difference  in  the  purchasing 
power  of  money  should  be  considered ;  that  of  2  cents 
in  the  United  States  is  approximately  equal  to  1.7 
cents  in  Germany.  Their  freight  service  has,  on  the 
other  hand,  been  far  more  expensive  than  that  in  the 
United  States.  The  difference  in  the  character  of 
the  traffic  and  in  the  length  of  the  haul  cannot  explain 
away  all  the  difference  in  the  charges.  The  German 
freight  servicejias^  moreover^  not  adjusted  itself  to . 
"the  needs  of  industry  and  commerce  as  it  should  have  . 
done.  It  has  been  admirable  from  the  point  of  view  of 
the  abstract  justice  of  the  service  and  rates,  but  it  has, 
we  think,  been  too  non-adjustable ;  the  distance  prin- 
ciple of  rate  making  has  been  too  rigidly  followed,  and 
the  value  of  the  service  or  of  the  commodities  has  been 
too  much  ignored. 

General  Results 

Our  investigation  in  the  history  of  state  operation 


304  Railway  Transportation 

in  a  number  of  important  countries  entitles  us,  we 
fancy,  to  make  a  few  general  statements  concerning  it, 
without  bringing  upon  ourselves  the  charge  of  dealing 
in  extravagances  of  speech.  We  believe  the  following 
general  facts  make  themselves  fairly  clear  throughout 
the  history  of  state  management : 

(i)  That  government  operation  of  the  railways 
has,  with  a  few  notable  exceptions,  as,  for  instance, 
the  Prussian,  not  paid  all  of  its  expenses,  and  that  it 
has  consequently  been  a  burden  upon  the  tax-payers. 

(2)  That  government  operation,  though  it  has 
been  a  burden  to  the  citizens  as  tax-payers,  has  not 
suppHed  them  with  a  particularly  excellent  service — 
that  its  freight  service  especially  has  lacked  in  effi- 
ciency and  practical  adjustability  to  traffic  and  indus- 
trial conditions. 

(3)  That  government  operation,  though  it  has  not 
been  particularly  efficient,  has  not  been  especially 
cheap — that  its  freight  rates  have  not  been,  after  all 
allowance  for  difference  in  traffic  conditions  has  been 
made,  as  low  as  those  upon  a  number  of  the  privately 
managed  railways. 

(4)  That  government  operation,  to  be  at  all  effi- 
cient, presupposes  the  existence  of  a  highly  central- 
ised, powerful,  and  intelligently  active  administration 
— an  institution  which  exists  only  in  a  few  cotmtries, 
and  which  the  people  of  the  United  States  have,  at 
the  present  at  least,  no  desire  to  possess. 

(5)  That  government  operation  is  not  needed  at 
the  present,  at  least  in  Great  Britain  and  the  United 
States,  to  supply  the  lack  of  railway  facilities.  Private 
capital  with  slight  aid  has  done  this  in  the  past,  and 
it  can  alone  and  unaided  do  it  in  the  future. 


State  Operation  of  Railways       305 

(6)  That  government  operation  is  not  needed  at 
the  present,  at  least  in  Great  Britain  and  the  United 
States,  to  correct  the  abuses  of  private  operation. 
This  has  been  done  by  government  supervision  and 
regulation  with  a  fair  degree  of  efficiency,  and  it  can 
be,  and  will  be,  done  in  the  future  with  still  greater 
efficiency. 

(7)  That  the  institution  of  government  operation 
in  such  countries  as  the  United  States  and  Great 
Britain,  with  their  present  systems  of  comparatively 
efficient  operation  under  relatively  effective  state 
control,  could  have  no  possible  defence  except  that  of 
political  and  social  ambition — the  ambition  of  the 
state  to  become  wider,  greater,  and  more  powerful  in 
all  phases  of  the  life  of  the  people,  to  perform  services 
which  private  enterprise  under  state  supervision  could 
perform  just  as  well,  and  perhaps  much  more  effi- 
ciently.    Its  only  possible  defence  would  be  socialism. 

Extension  of  the  Parcels  Post,  Not  State  Operation 
in  the  United  States 

It  has,  we  think,  been  made  reasonably  clear  that 
private  operation  of  the  railways  in  the  United  States 
under  government  control  has  become  comparatively 
efficient  and  equitable.  It  is  equally  clear  that  a 
government  so  divided  and  decentralised,  and  so 
changeable  in  its  partisan  politics,  as  that  of  the 
United  States  cannot  efficiently  manage  a  business 
involving  so  much  capital  and  so  much  risk  and 
complexity  as  railway  transportation,  especially  when 
there  i"  in  reality  no  fundamental  cause  for  such 
action. 


3o6  Railway  Transportation 

The  management  of  the  railways  in  the  United 
States  should  remain  in  the  hands  of  private  enter- 
prise, and  the  scope  of  this  operation  should,  we  think, 
be  extended  so  as  to  cover  much  of  the  express  service. 
The  railways  have  transported  most  of  the  express 
for  express  companies,  not  upon  their  own  responsibil- 
ity. Why  should  they  not  develop  a  service  of  their 
own,  which  would  transport,  at  least,  all  the  larger 
packages  of  commodities  that  must  move  at  express 
speed?  Such  an  extension  of  the  scope  of  the  railway 
service  would  place  the  shipper  in  more  direct  and 
closer  relations  with  the  carrier.  These  relations  have 
been  more  indirect  and  complicated  than  necessary. 
The  express  company  has  made  the  collection  and 
delivery  of  the  commodities  and  asstmied  the  risk  of 
their  transportation;  the  railway  has  supplied  most 
of  the  facilities  of  transport  and  has  moved  the  cars. 

The  express  companies  have  since  about  1850 
become  larger  and  more  monopolistic,  until  they  have 
at  present  a  territory  almost  their  own.  Six  com- 
panies, out  of  approximately  thirty,  now  have  almost 
90%  of  the  total  express  mileage  and  about  80%  of 
the  total  net  income  from  the  express  service.  The 
transportation  of  freight  and  passengers  has  also 
come  to  be  performed  by  a  few  large  systems  of  rail- 
ways; and  these  same  systems  transport,  for  the 
express  companies,  most  of  the  express  of  the  United 
States.  The  railways  could  upon  their  own  responsi- 
bility effectively  and  economically  perform  most  of 
the  express  service.  They  could,  we  believe,  do  it 
with  more  satisfaction,  responsibility,  and  economy 
than  the  present  express  companies.  The  net  earn- 
ings of  most  of  these  companies  have  for  many  years 


State  Operation  of  Railways       307 

been  comparatively  large;  in  some  instances  notably 
large.  The  percentage  of  the  earnings  to  the  stock 
in  1909  was  for  the  American  Company  19.3,  for  the 
Adams  23.8,  for  the  United  States  8.9,  and  for  the 
Wells  Fargo  58.3.  It  would,  therefore,  be  very 
profitable  for  the  railways  to  transport  much  of 
the  express  upon  their  own  account. 

The  express  rates  of  the  United  States  have  been 
high.  They  have  upon  the  whole  averaged  a  good 
many  times  those  of  the  freight  service.  And  this  is 
true  of  many  countries — in  fact  of  all.  In  France 
they  are  about  7  to  i ,  in  Prussia  5  to  i ,  in  the  United 
States  from  14  to  16  to  i.  These  ratios  must,  of 
course,  be  considered  in  connection  with  the  fact  that 
the  express  moves  in  comparatively  small  lots  and 
the  freight  in  large  ones.  For  the  same  size  piece 
shipments,  the  express  rates  in  the  United  States  are 
from  3  to  6  times  those  of  the  freight.  From  the 
point  of  view  of  its  rates,  both  the  railways  and  the 
shippers  must  be  vitally  interested  in  the  transporta- 
tion of  express. 

The  railways  of  the  United  States  should  develop 
an  express  service  of  their  own,  at  least  for  the  larger 
packages.  And  the  postal  service  should,  we  think, 
extend  its  scope  to  cover  more  of  the  transportation 
of  the  smaller  parcels.  The  post-office  possesses  the 
machinery,  in  all  parts  of  the  country,  for  the  move- 
ment of  small  packages.  It  now  transports,  through 
contracts  with  the  railways  and  other  carriers,  parcels 
weighing  as  much  as  4  pounds.  Why  could  it  not 
with  a  fair  degree  of  efficiency  and  economy  transport 
parcels  weighing  not  more  than  11  pounds — the 
amount  carried  by  post  in  the  domestic  service  of 


3o8  Railway  Transportation 

many  countries  and  by  the  international  postal  union? 
The  United  States  now  has  conventions  with  about 
C4  countries,  by  which  it  carries  through  the  post- 
office  in  the  domestic  service  parcels  of  ii  pounds 
when  sent  to  or  from  any  of  these  countries. 

The  small  parcels,  those  not  exceeding  1 1  pounds  in 
weight,  consist  of  merchandise  or  of  special  commodi- 
ties, as,  for  instance,  fruits,  dairy  products,  etc.  The 
classification  of  these  parcels,  as  now  made  by  the 
express  companies,  is  very  simple.  Their  rates  are 
consequently  fixed  with  little  difficulty.  The  trans- 
portation by  the  post-office  of  parcels  weighing  not  in 
excess  of  ii  poimds  wotild,  therefore,  not  involve 
great  complexity  of  classification  or  rates.  The  capi- 
tal needed  by  the  parcels  post  is  very  slight  as  com- 
pared with  that  required  by  the  railways;  and  its 
returns  are  relatively  constant.  The  simplicity  of 
the  service  and  the  relative  smallness  of  the  capital, 
as  well  as  the  certainty  of  its  returns,  make  it  a  proper 
business  for  state  operation. 

The  post-office  could,  we  think,  perform  this  service 
with  fair  success,  certainly  if  public  opinion  should  be 
sufficiently  intelligent  and  interested.  If  it  could 
perform  it  with  fair  economy  and  efficiency,  it  would 
bring  an  express  service  within  the  reach  of  the  many 
rural  sections  of  the  United  States,  which  now  do  not 
and  cannot  have  such  a  service.  The  private  express 
service  cannot  easily  reach  the  thousands  of  non-rail- 
way points.  These  points  should  be  connected  with 
the  towns,  for  the  welfare  of  all.  The  fact  that  the 
present  freight  service  has  as  its  minimum  of  charge 
that  of  lOO  pounds  and  the  further  fact  that  the 
present  minimum  of  charge  by  the  express  companies 


State  Operation  of  Railways      309 

is  about  25  cents  mean  that  even  the  railway  points 
do  not  possess  an  efficient  and  economical  transporta- 
tion service  for  small  packages.  The  express  com- 
panies do  not  have  the  machinery  for  such  a  service 
at  many  points,  if  indeed  at  any.  The  post-office  has 
the  machinery  at  all  points. 

The  post-office  could  transport  the  small  parcels  at 
the  present  express  rates  and  make  profits.  It  could 
carry  them  at  rates  lower  than  the  present  ones,  and 
pay  expenses.  The  express  service  of  the  United 
States  is  too  expensive  to  meet  at  all  completely  the 
needs  of  a  great  and  widely  extended  people.  The 
rates  of  the  service  may  be,  and  most  probably  will  be, 
reduced  by  the  Interstate  Commerce  Commission,  to 
which  was  in  1906  and  1910  given  the  power  of  con- 
trol over  express  companies.  This  will  not,  however, 
bring  a  cheaper  service  to  the  rural  sections. 

The  extension  of  the  post  so  as  to  cover  parcels 
weighing  not  more  than  11  pounds  would  not  bring 
loss  to  the  railways;  they  would  continue  to  perform 
the  service  of  actual  conveyance  for  the  great  bulk  of 
these  parcels.  The  post-office,  as  well  as  the  express 
companies,  must  employ  the  railways  to  supply,  in 
large  part,  the  facilities  of  their  transportation  and  to 
move  the  cars.  There  should,  therefore,  be  no  oppo- 
sition on  the  part  of  the  railways  to  the  proposed 
extension  of  the  parcels  post.  A  cheaper  transporta- 
tion of  the  express  packages  weighing  between  4  and 
II  pounds  would  certainly  mean  a  great  increase  in 
the  number  of  such  parcels,  and  this  would,  we  think, 
bring  increased  returns  to  the  railways  from  their 
transportation. 

That  it  would  also  bring  benefit  to  the  man  who  lives 


310  Railway  Transportation 

in  the  rural  sections  which  are  now  without  express 
service,  there  can  be  Uttle,  if  any,  doubt.  He  could 
buy  from  more  distant  places  a  nimiber  of  the  needed 
commodities  and  secure  their  delivery  at  his  home 
without  a  high  cost.  He  could  more  economically 
purchase  these  from  the  large  mail-order  houses 
located  in  the  centres.  He  could  also  sell  some  of  his 
products  at  a  smaller  cost  of  delivery.  As  a  con- 
sumer, he  would  receive  gain  from  a  parcel  post. 
Would  he  also  as  a  producer?  The  very  facility  with 
which  he  could  buy  from  the  mail-order  houses  or  sell 
to  some  distant  purchaser  would  tend  to  discourage 
the  development  of  the  local  merchant.  Does  not 
the  man  of  the  rural  section  need  the  prosperous  local 
merchant,  to  whom  he  may  sell  many  of  his  products 
which  cannot  be  shipped  in  ii -pound  lots?  Yes, 
most  certainly.  Such  a  merchant  is,  however,  not  the 
one  from  whom  he  now  obtains  many  of  his  small 
purchases;  many  of  these  come  from  the  store  which 
sells  to  him  but  does  not  in  turn  purchase  from  him. 
An  efficient  post  for  parcels  not  exceeding  1 1  pounds 
in  weight  would  unquestionably  discourage  the  small 
local  merchant  who  only  sells  to  the  farmer  and  does 
not  buy  from  him.  And  the  fact  that  a  parcels  post 
would  discourage  such  a  merchant  is,  we  think,  no 
valid  objection  to  it. 

The  parcels  division  of  the  post-office  would  deal 
with  commerce,  not  with  education,  as  is  in  part  the 
case  of  the  transportation  of  letters,  newspapers,  and 
periodicals.  Its.  defence  must,  therefore,  rest  solely 
upon  the  basis  of  the  service  which  it  renders  to  trade. 
A  rate  that  does  not  consider  the  distance  element  in 
transportation  might  in  such  a  vast  coimtry  as  the 


State  operation  of  Railways       311 

United  States  centralise  trade  too  much  in  those  parts 
which  are  already  too  congested.  A  system  of  zone 
rates,  after  the  manner  of  the  German,  would  prevent 
this,  though  it  would  make  the  administration  of  the 
parcels  post  more  complicated  than  would  a  non- 
distance  rate.  A  parcels  post  for  packages  not  exceed- 
ing II  pounds  with  a  non-distance  rate  has  not,  we 
think,  brought  concentration  and  congestion  in  Great 
Britain.  It  must,  however,  be  remembered  that  the 
area  of  the  United  States  is  about  thirty  times  that 
of  the  United  Kingdom.  The  Germans,  with  an  area 
about  one-seventeenth  of  that  of  the  United  States, 
have  found  it  best  to  transport  their  parcels  according 
to  a  zone  system  of  rates.  The  fact  that  their  post- 
office  carries  parcels  weighing  as  much  as  no  pounds 
must,  of  course,  be  considered;  it  makes  a  non-dist- 
ance rate  all  the  less  reasonable. 

The  proposition  to  extend  the  scope  of  the  parcels 
post  in  the  United  States  does  not  suggest  a  new 
function  of  the  government.  It  cannot  be  condemned 
upon  this  basis.  It  does,  however,  make  necessary  a 
change  in  the  method  of  rate  making.  Should  the 
post-office  undertake  the  enlargement  of  its  parcels 
department,  it  must,  if  it  acts  with  fairness  and  wis- 
dom, adopt  the  principle  of  making  the  expenses  of 
the  operation.  The  post-office  can  afford  to  transport 
letters,  and  especially  certain  newspapers  and  periodi- 
cals, upon  the  basis  of  maximimi  service,  even  though 
at  a  slight  loss ;  the  educational  restilts  of  such  trans- 
portation are  of  value  to  the  people.  The  conveyance 
of  small  parcels  of  the  ordinary  commercial  pro- 
ducts at  public  expense  cannot,  we  think,  offer  a 
reasonable  defence.     The   parcels   post   department 


312  Railway  Transportation 

must  be  managed  upon  the  principle  of  self-sup- 
port. 

For  a  number  of  years,  this  has  been  the  principle  of 
rate  making  for  the  first,  third,  and  fourth  classes  of 
service.  It  has  been  in  the  second  class  that  the 
postal  service  of  the  United  States  has  quite  largely 
departed  from  the  principle  of  making  the  expenses  of 
operation;  and  this  has  in  large  measure  been  due  to 
the  idea  of  the  educational  service  which  newspapers, 
magazines,  and  periodicals  (issued  at  least  quarterly) 
have  rendered  to  the  people.  This  class  of  postal 
matter  has  amounted  to  nearly  65%  of  the  total 
weight  of  all  the  mail  of  the  United  States,  while  its 
income  has  been  but  about  5%  of  the  total  postal 
revenue.  By  far  the  larger  part  of  this  class  has 
moved  at  the  insignificantly  small  rate  of  one  cent  per 
pound — publishers'  rate — ,  while  its  actual  cost  of 
transportation  has  been  from  5  to  7  cents  per  pound . 
The  demand  for  a  radical  change  in  the  principle  of 
rate  making  for  this  class  of  service  is  strong.  The 
second  class  must  soon  adjust  itself  more  nearly  to  the 
basis  of  the  cost  of  the  service;  its  educational  value 
cannot  possibly  equal  the  great  difference  that  exists 
between  its  cost  and  its  income. 

What  should  be  the  rates  of  the  enlarged  parcels 
post?  The  present  parcels  rates  for  the  purely  domes- 
tic service  are:  i  cent  an  ounce  (16  cents  a  pound)  for 
merchandise  and  i  cent  for  2  ounces  (8  cents  a  potmd) 
for  books,  seeds,  plants,  etc.  The  merchandise  rate 
for  the  international  service  between  the  United 
States  and  twenty-four  other  countries  is  12  cents  a 
pound  for  parcels  weighing  not  in  excess  of  1 1  pounds. 
Could  the  post-office  of  the  United  States  afford  to 


State  Operation  of  Railways       313 

offer  a  rate  of  say  16  cents  for  the  first  pound  and  of  6 
cents  for  each  additional  pound  in  the  package,  with 
76  cents  as  the  maximum  for  a  package  of  1 1  pounds 
regardless  of  the  distance?  The  British  post  carries 
parcels  at  6  cents  for  the  first  pound  and  2  cents  for 
each  additional  pound  in  the  parcel,  with  a  maximum 
of  24  cents  for  parcels  weighing  as  much  as  1 1  pounds. 
The  average  length  of  the  postal  haul  in  Great  Britain 
is,  however,  very  slight  as  compared  with  that  in  the 
United  States — perhaps  only  about  one-tenth.  This 
difference  in  the  haul  must  make  a  significant  difference 
in  the  rate,  if  indeed  it  does  not  demand  for  the  United 
States  the  adoption  of  a  zone  system  of  postal  rates  in 
the  place  of  the  non-distance  one.  The  density  of 
population  of  Great  Britain  is  about  fifteen  times  that 
of  the  United  States.  One  niral  carrier  in  the  United 
Kingdom  can  serve  from  ten  to  twelve  times  as  many 
people  as  in  the  United  States.  The  rate  in  the 
United  States  must,  therefore,  be  considerably  higher 
than  in  Great  Britain. 

The  German  charges  for  parcels  are  as  follows : 

Under  5  kilograms  (11  lbs.). 

(o)  For  a  distance  of  10  German  miles  (46  English),  25  pf. 
(6  cents). 

(6)  Unlimited  as  to  distance,  50  pf.  (12  cents). 

For  each  additional  kilogram  (2.2  lbs.),  the  rate  varies  with 
the  2Sones: 


10  German  miles 5  pf. 


30 
100 

Over  150 


10 
20 
30 
40 
50 


314  Railway  Transportation 

The  German  parcels  rates  vary  with  the  weight  and 
with  the  distance  of  the  carriage.  The  purpose  of 
these  variations  is  to  make  the  rates  respond  to  the 
cost  of  service,  and,  in  the  case  of  that  of  distance,  to 
prevent  too  great  a  concentration  of  trade  in  certain 
centres.  A  uniform  rate  for  a  letter  is  more  equitable 
than  for  a  parcel  of  merchandise  or  other  product ;  the 
weight  of  the  letter  is  practically  a  negligible  quantity, 
and  a  non-distance  rate  for  it  can  have  no  influence 
towards  the  concentration  of  commerce  in  the  great 
cities.  The  German  rates  are  considerably  less  than 
the  post-office  of  the  United  States  coidd  afford  to 
charge.  The  haul  in  one  cotmtry  is  comparatively 
short,  in  the  other  very  long.  The  density  of  popula- 
tion in  Germany  is  almost  twelve  times  that  of  the 
United  States ;  one  niral  carrier  can  there  serve  perhaps 
eight  times  as  many  people  as  in  the  United  States. 

Should  the  parcels  division  of  the  post-office  adopt 
a  zone  system  of  rates — let  us  say  at  loo,  200,  500, 
1000,  1700,  2500,  and  over  2500  miles — ,  the  rates 
suggested  above  must  for  the  first  zone  be  materially 
reduced.  Just  what  they  should  be,  must  be  decided 
by  experience.  It  would  be  impossible  to  fix  the  rates, 
if  according  to  the  expense,  as  they  should  be,  with 
accuracy  except  after  experimentation.  The  rates  in 
force  in  Great  Britain,  Germany,  and  the  other 
countries  which  have  had  a  successful  experience  with 
the  parcels  post,  could,  of  course,  be  of  slight  value  to 
the  United  States ;  the  differences  in  area,  density  of 
population,  industrial  and  commercial  conditions,  and 
the  cost  of  service,  make  a  fair  comparison  impossible. 
The  general  scale  of  costs  is  less  in  most  of  these  coun- 
tries,  certainly  in  Germany;  and  here  the  govern- 


State  Operation  of  Railways       315 

mental   service  is  more    uniformly    intelligent    and 
eflBcient  than  it  is  in  the  United  States. 

For  the  Government  in  the  United  States  to  under- 
take the  operation  of  the  railways  would  be,  at  least  for 
many  years  to  come,  an  act  fraught  with  many  risks 
and  dangers,  economical  and  governmental.  The 
proposed  extension  of  the  scope  of  the  parcels  post, 
while  by  no  means  a  simple  and  easy  proposition,  may, 
we  think,  be  realised  with  fair  success. 

References 
(See  note  to  References  to  Chapter  I.) 

Archivfiir  Eisenbahnwesen,  Berlin. 

Atti  delta  Reale  Commissione  per  lo  Studio  di  Proposte  intomo 
all'  Ordinamento  delle  Strode  Ferrate,  vol.  lo  (Ordinamento  deW 
Escercizio  di  Stato),  1904,  Rome. 

Report  to  the  Board  of  Trade:  Railways  in  Germany,  1909, 
London. 

Reports  to  the  Board  of  Trade:  Railways  in  Belgium,  France, 
and  Italy,  19 10,  London. 

Reports  to  the  Board  of  Trade:  Railways  in  Austria  and  Hun- 
gary, 1909,  London. 

A.  von  der  Leyen:  "Eisenbahnpolitik,"  in  Handworterbuch  der 
Staatswissenschaften,  1900,  Jena. 

G.  Keller:  Der  Staatsbahngedanke  {bei  den  verschiedenen 
Volkern),  1897,  Aarau. 

A.  Wagner:  Finanzwissenschaft  (Erster  Teil),  1883,  Leipzig. 

G.  Cohn:  Zur  Geschichte  und  Politik  des  Verkehrswesens,  1900, 
Stuttgart. 

W.  M.  Acworth:  "The  Relation  of  Railroads  to  the  State," 
in  Economic  Journal  (Eng.),  Dec,  1908. 

E.  A.  Pratt:  State  Railways,  1907,  London. 

E.  A.  Pratt:  Railways  and  Nationalisation,  1908,  London. 

Hearings  (on  the  Parcels  Post)  before  Subcommittee  No.  4  of 
the  Committee  on  the  Post-Office  and  Post-Roads  (H.  R.),  191 1, 
Washington. 


3i6  Railway  Transportation 

Journal  of  Political  Economy,  vol.  i6,  1908,  Chicago. 

Johnson  and  Huebner:  Railroad  Traffic  and  Rates,  2  vols.,  191 1, 
New  York. 

Report  of  the  Joint  Committee  on  Postal  Service:  Sen.  Doc. 
89,  56  Cong.,  2d  sess.,  3  vols.,  1900,  Washington. 

Annual  Reports  of  the  Postmaster-General,  Washington. 

O.  Hammer:  Die  Deutsche  Post  als  Vermittlerin  von  Warenver- 
kehr,  191 1,  Leipzig. 

See  also  references  on  the  French,  Italian,  and  German  Rail- 
ways. 


INDEX 


Acworth,  W.  M.     . 
Adams,  C.  F. 
Adriatic  Co    . 
Alabama  Midland  case 
Alsace-Lorraine 
Antwerp 


B 


Baltimore  and  Ohio  Railway 

Barimes 

"  Basing-point "  system 

Bavaria 

Beale  and  Wyman 

Berlin,  food  supply 

Bismarck 

"  Blanket  rates  " 

Board  of  Trade: 

Complaints  of  increases  in  rates 

Makmg  rates  . 

Power  over  agreements 

Power  over  amalgamations 

Power  over  charters  and  laws 

Power  over  collection  and  delivery  charges 

Power  over  railway  disputes 

"Provisional  orders" 

Schedule  of  rates 

Terminal  rates 
Borght,  R.  von  der 
Bremen 
Bresciani.C. 
Budd's  case    . 
Bundesrath 
Burmeister,  H  . 


Pages 
60,315 

13 

III-13,  115,  191 

.      258,271 

137. 145. 169,  172 

161 


183, 206,  209 

90, 244 

234-6,271,274 

.      137. 168 

276 

163 

51,136,139.169 

238 

39 
35.  52 

49 
22,23 

47.  48 

40,  41 

53 

37 

38 

53.  54 

13 

161 

133 

56 

169-70 

176 


Calabrian-Sicilian  Co. 


317 


105 


3i8 


Index 


Packs 

Carbondale  and  Honesdale  Railway  .         .         .  i8i 

Cauer,  W.       .......         .  176 

Central  Pacific        .......     185, 200 

Charleston-Hambtirg       ......  182 

Chevalier,  M.  .......  277 

Chicago,  Burlington,  and  Qmncy      .         .         .         .  181 

Chicago-Omaha  pool       ......'    208-9 

Clark,  J.  M.  . 277 

Cohn,  G 59.315 

Colon    .........     216,237 

Colson,  C.      .......         .         loo-i 

Combination  (of  railways)        ....       20-4, 204-13 

"Commodity"  clause      ......         268-9 

Commodity  rates    .....       42-3, 91-4, 227-30 

"Community  of  interest"         ....  .211,231-2 

Consolidation,  influence  of        ....  .  9-1 1 

Cost  of  service  principle  .  51.  54i  56-7, 228-31,  242-4,  260-2 

Court  of  common  pleas    ......  48 

Court  of  queen's  bench    ......  53 

Cullom  committee  .......  254 

Cumberland  road 179 

D 


Dartmouth  College  decision     . 

248-9 

Depretis          ..... 

108-9 

"  Differential "  rates 

.     209,236 

Dixon,  F.  H 

277 

Dortmund-Ems  canal 

148 

B 

Eastern  Railway  (Ft.) 72, 89 

Eger,  G 176 

Elbe 146-8 

Elkins  Act 265-6 

Erie  Canal 180-1 

Erie  system    ........  206, 209 

F 


Fochier,  E.  . 
Foville,  A.  de 
France — Railway  Transportation 

Acts         .... 

Cahier  des  charges 

Capital  per  mile 

Cars,  size  of     . 


177 

13 

61-101 

96, 167 

85,87,88,92,95,96,99 

77 

93 


Index 


319 


Prance — Railway  Transportation — Cont. 
Classes  of  freight 
Coal,  output  of 
Coefficients  of  operation    . 
Commercial  advisory  council 
Commission  of  audit 
Commodity  (or  exceptional)  rates 
Competition     . 
Concessions  (conventions) 
Co-operation  between  state  and  companies 
Development  of  lines 
Director  of  commercial  control 
Director  of  control    . 
Director  of  operation 
Freight  service  and  rates  . 

Fast  service  and  rates 

Slow  service  and  rates 

Rates  inelastic  . 
General  council  of  bridges  and  roads 
Guarantee  (by  state) 
Haul,  length  of 
Income  (to  capital)  . 
Inspection  des  finances 
International  traffic 
Machinery  (and  ideals)  of  state  control 
Maximum  rates 
Mileage: 

Per  10,000 

Per  lOO  sq.  miles 
Minister  of  public  works     . 
Passenger  service  and  rates 

Classes 

Length  of  journey 

Per  capita  trips . 

Rates  melastic  . 
Plans  of  1842,  1852,  1865 
Purchase  of  state  nets 
Regulation  of  private  lines 
Repurchase 
Silk  industry    . 
State  building 
Tapering  rates 
Taxes 

Technical  advisory  council 
Tonnage  of  railways 
Traffic  conditions 
Waterways 

Cost  to  state 


Pacm 

86-8,91,93 

79 

78 

98-100 

98 

91-4 

64-6,71,92 

62,  66,  71-6,95 

61-78 

62-78 

97 

97 

100 

86-94 

88-90 

88, 90-4 

244 

98 

66-7, 74-6, 94 

94 
77-8 

97 

79-80 

95-100 

87-93, 96 


87.' 


78 

78 

91,95-100 

84-6 

84 
29 

29.83 

94.95 

64,  65,  68,  69 

68,  70-2 

100 

63 

79 

62-4 

89-91.93 
76,77,81,85,90 

98 

81-2 

78-82 

80-2 

80-1 


320 


Index 


Pages 


Protection  of     . 

81 

Wheat  industry         .... 
Franco-Prussian  War      .... 

79 

•      67. 137 

(De)  Freycinet  programme 

G 
Gambetta      ...... 

.69-71.73 

71 

Gasca,  C.  L. 

133 

Germany — Railway  Transportation 

134-77 

Advisory  councils     .... 

172-3 

Beginnings  of  state  lines    . 

135-6 

Capital  per  mile        .... 

140-1 

Chemical  industry    .... 

145 

Coal,  location  of,  etc. 

144 

Coefficients  of  operation    . 

141 

Competition  with  the  French,  Belgian  and 

Dutch 

carriers     .         . 

I6l 

Development  of  lines 

.       134-43 

Distance  rates           .... 

163-4 

Earnings  (on  capital) 

141-2 

Empire,  formation  of         .         .         . 

136 

Freight  cars,  size  of           ... 

165 

Freight  classification 

156-7 

Freight,  length  of  haul 

157 

Freight  rates  and  service  . 

.       155-65 

Export  and  import     . 

161-2 

Rates  inelastic  .... 

244 

General  conference  of  railway's  . 

173-4 

Imperial  control  over  railways   . 

168-70 

Iron  and  steel  industry 

.       26,  145 

Mileage: 

Per  10,000         .... 

.       139-40 

Per  100  sq.  miles 

.       139-40 

Mineral  resources     .... 

143-4 

Nationalization  of  lines      . 

137-8 

Parcels  rates    ..... 

311,313-14 

Passenger  service  and  rates 

150-5 

Classes  of           .... 

151-3 

Density  of  traffic 

151-2 

Length  of  journey 

29 

Per  capita  trips. 

29 

Percentage  of  travel  per  class 

151 

Population       ..... 

144 

State  aid 

134-5 

State  control — management 

167-76 

Station  charges         .... 

160 

Index 


321 


Paces 


Germany — Railway  Transportation — Cont. 

Tarififs     .... 
Exceptional 

Tariff  commission     . 

Textile  industry 

Traders'  committee  . 

Traffic  association    . 

Traffic,  conditions  of 
Exceptional 

Verein  deutscher  Eisenbahnverwaltungen 

Waterways 

Importance  of   . 
States,  expenditures  for 
Tonnage  . 
Traffic       . 

Wheat  industry. 

Zone  (tapering)  rates 
Gladstone       .... 
Gould  system 
Granger  cases. 
Great  Britain— Railway  Transportation 

Acts        ....  21-3 

Amalgamations  (and  combinations) 

Area  of   . 

Capital  per  mile 

Cars,  size  of     . 

Coal,  output  of,  etc. 

Coefficients  of  operation    . 

Collection  (and  delivery)  charges 

Combination  (and  consolidation) 


Commission  (railway  and  canal) 

Competition    . 

Conveyance  charges 

Cost  of  service  principle  of  rates 

Cotton  industry 

Delivery  charges 

Earnings  (on  capital) 

Freight  traffic,  service,  rates 

Classification  of 

Class  rates 

Commodity  rates 

Decline  in  rates. 

Elasticity  of 

Hauls,  length  of. 
International  traffic 
Iron  industry  . 

Liverpool-Manchester  Railway 
Long  and  short  haul 


155-7. 


162 
157 
174 
145 
174 
174-5 
143-9 
160 

175 

145-9 

146 

147 
146 

147 
144 

158-64. 3"f  313 

32 

187 

248 

14-60 

35,  37.  47-9,  51. 52. 54 
21-3 

25 
18-19 

43-44 
26 

24 

40.41.44 

20-4 

23, 41,  48-58, 255-6, 259-60 

46, 55-7 

41-2. 54 

30-1 

26 

40-1 

24 

35-44 

36-41 

41-2 

42-3 

43 

42-3,244 

35.44 
26 
26 

15-16 
55 


322 


Index 


Paces 

Great  Britain — Railway  Transportation — Cont. 

Maxima           ....  35.39.40,41.42.53.54.57 

Mileage: 

Growth  of          .... 

18 

Per  10,000          .... 

19 

Per  100  sq.  miles 

19 

Parcels,  rates  of        ...         . 

313 

Parliament  in  rate  making 

35. 53 

Passenger  traffic,  service,  and  rates    . 

28-34 

Cheap  trains  Act 

32-3 

Classes  of           .... 

32-4 

Density     ..... 

29-30 

Length  of  journey 

29 

Per  capita  trips. 

29 

Preference          .... 

.     53.55-7 

Railway  clearing-house 

.         .          36-7 

Reasonableness  of  rates     . 

53-8 

Regulation: 

By  charters       .... 

45-6 

Extent  of           .... 

47 

By  law 

46-59 

State  aid          ..... 

17 

State  control,  machinery  of 

45-59 

Tapering  rates.          .... 

41-2 

Terminal  charges      .... 

37.40,53.54 

Traffic: 

Conditions  of     . 

25-8 

Entries  of.         ...         . 

37 

Waterways      ..... 

25-8,  55-7 

Woolen  industry       .... 

26 

Great  Central  Railway    .... 

20 

Great  Eastern  Railway   .... 

20-41 

Great  Lakes  .          .          .          . 

.     146,217 

Great  Northern  Railway  (Brit.) 

20 

Great  Northern  (U.  S.) 

187 

Great  Western  Riailway 

ao,4i 

H 

Hamburg       ........  161 

Hammer,  O. 316 

Hammond,  M.  B 277 

Haney,  L.  H 277 

Harriman  system    .......  187 

Havel 147 

Hepburn  BiU 266-70 

Highway        ........  3 

Hill  system 187 


Index 


323 


Packs 


Horse-car  Raflway 

.         . 

7 

Huskisson . 

I 

Illinois  Central  Railway 

16 

.     199, 201 

Interstate  Commerce  Act         ....       6 

,211,257-8 

And  the  common  law         .... 

254-5 

Relation  to  British  Acts    .... 

254 

Revisions  of     .         .         .         .         .         .2 

28,265,270 

Interstate  Commerce  Commission     .           226, 228, 2 

38,268,271 

Activity  ....... 

273-4 

.     255, 270 

Cost  of  service  principle  of  rates  . 

260-2 

In  "  Eastern  "  and  "  Western ' '  decisions 

274 

Overruled  by  courts           .... 

264 

Power  over  complained-of  rates  . 

263-4 

Power  to  investigate  proposed  increases  in  rates 

273 

Practical.          ...... 

263 

"  Rule  of  Reason  "    ..... 

272 

Summary  of  its  work          .... 

264 

Tasks 

256, 259-60 

Value  of  service  principle  of  rates 

260-3 

Ireland,  state  aid  in         ....          . 

45 

Italy — Railway  Transportation 

102-33 

Acts        . 

.     115. 116 

Advisory  councils     ..... 

130 

Austrians  in  the  railways  ....       I 

33-5. 107-8 

Capital  per  mile        .          . 

116-17 

Coefficients  of  operation    .... 

118 

Concessions  (conventions)           .          .    102-4,  10, 

5-7,111-15 

Council  of  railway  administration 

108, 131-2 

124 

Department  of  state  railways     . 

130-1 

Director  general  of  railways 

131-2 

District  directories  .         . 

132-3 

Earnings  of  state  operation 

119-20 

Equipment,  condition  of    . 

119 

Exports  and  imports,  influence  on  railways. 
Freight: 

Classes  of          ..... 

122-3 

124, 127-8 

Rates  and  service 

127-9 

Tonnage   . 

122 

French  in  the  railways 

103, 108 

General  advisory  council 

132 

General  directory 

131-2 

Inspector  general 

129-30 

Iron 

121 

324 


Index 


Pages 


Italy — Railway  Transportation — Cont. 

Lines,  growth  of        ...          . 

102-20 

Maxima  ...... 

124 

Mileage: 

Per  10,000         .... 

117 

Per  100  sq.  miles 

117 

Minister  of  finance   .... 

131 

Minister  of  public  works   . 

III, 124, 129-32 

Monopoly         ..... 

III 

Natural  resources     .... 

121 

Parliament,  over  railway  administration 

131-2 

Passenger  rates  and  service 

124-7 

Classes      ..... 

125-7 

126-7 

Traffic,  conditions  of  . 

124-5 

Prussia — Italy.         .... 

106 

Reports  on  railways 

108-11, 1 15-16 

Seaports           ..... 

122-3 

Silk  industry    ..... 

122 

Southern  Railway     .... 

.     116,123 

State  aid 

103 

State  control    ..... 

129-30 

State  department  of  railways     . 

118 

State  machinery  and  ideals  of  management 

•       129-33 

State  operation         .... 

108-10, 116 

State  supervision      .         .         .         .         . 

123 

Supervisory  committee      .          .          .          . 

132 

Traffic  conditions      .         .         .         .         . 

12 1-4 

Waterways       ...... 

123 

Wheat 

122 

Wines 

J 

Johnson,  E.  R 

122 

277 

Johnson  and  Huebner      .         .         .         .         . 

.     277,316 

Joint  executive  committee        .          .          .          . 

232 

Joint  traffic  association    .         .         .         .         . 

210-11 

E 

Kaiser,  the 

169 

Kaufmann,  R.  von 

lOI 

Keller,  G 

315 

Kupka,  P.  P 

277 

L 

Lambert,  H 

lOI 

Index 


325 


Lavoinne  and  Pontzcn     . 

Ley  en,  A.  von  der  . 

Lindsay,  W.  S.        . 

Liverpool  com  traders,  vs.  G.  W.  R. 

Loire  .... 

London  and  Brighton  Railway 

London  and  Northwestern  Railway 

London  and  Southwestern  Railway 

London,  supply  of  food 

Long  and  short  haul 

"Long  and  short  haul"  clause 

Lord  Chancellor  (of  England)  . 

Lord  Chancellor  (of  Ireland)    . 

Lord  President  of  Court  of  Session 

Lotz,  W 


53, 233-4. 238-9, 


Pagbs 

277 
277.315 
13 
56 
63 
20 
20 
20 

163 

257.271-3 

257-9 

52 

52 

52 

176 


M 


Macnamara,  W.  H. 
Mann-Elkins  Act  . 
Mansion  House  case 
Mauch  Chunk  Railway 
Maximum  Rate  case 
McLean,  S.  J. 
McPherson,  L.  G.  . 
Mediterranean  Co.  (P.  L 
Mediterranean  Co. 
Meyer,  B.  H. 
Midland  Railway    . 
Mileage,  of  world   . 
Miller,  A.  E. 
Minghetti 
Mississippi,  the 
Missouri,  the 
Monopoly,  of  railways 
Moore  system 
Morgan  system 


M.) 


180 


50, 59 

270-3. 275 

56-7 

181 

264, 265, 269 

60 

277 

.     72,91-3 

11,113,115,191 

277 

20 

II 

50 

108 

,218,233,236-7 

236-8 

62,203-4,212-13 

187 

187 


N 


New  York  Central 
New  York,  supply  of  food 
Northeastern  Rjailway 
Northern  Pacific 
Northern  Railway  (Fr.)  . 
Noyes,  W.  C. 


183, 205, 209 

90, 163 

20 

.     187,200 

72 

277 


326 


Index 


Pages 
Oder  .         .         .         .         .         .         .         .  147 

Ohio,  the  " 180,218,233 

Orleans  Railway     .......  72 


Panama  Railway    . 

216 

Paris,  supply  of  food 

.              90 

Parliament  (Brit.): 

Granting  charters     . 

.     15-7.45 

Investigating  amalgamations 

21-3 

Making  rates  . 

38,52 

Peel,  Sir  Frederick 

50 

Pennsylvania  system 

183, 187, 205,  209 

Picard, A.       .          .          .         . 

lOI 

Pooling,  laws  vs.     . 

259 

Postal  Service 

4 

Parcels  post     . 

.      305-16 

Pratt,  E.  A 

315 

Price,  (W.  P.)         .         .         . 

50 

"Provisional  Orders" 

38-40 

Prussia — Railway  Transportation: 

Advisory  councils 

172-3 

Commissioner  of  private  lines 

166-7 

Directories  of  railways 

167-8, 171-2 

Earnings  (on  capital) 

142-3 

Landtag  .... 

.     167, 170 

Law  of  1838     . 

166-8 

Mileage: 

Per  10,000 

.       139-40 

Per  100  sq.  miles 

139-40 

Minister  of  commerce,  industry, 

and  public  works  166-7, 170 

Minister  of  commerce  and  indus 

try    .         .         .             170 

Minister  of  public  works   . 

170-4 

Passenger  service  and  rates 

152-5 

Passenger  traffic: 

Density  of          .         .         . 

151-2 

Per  capita  trips. 

152 

Percentage  per  class  . 

150-1 

Prussian-Hessian  net 

137.139. 151 

Prussian  State  net    . 

138-40, 143, 150, 175-6 

State  control — management 

.       167-76 

Waterways      .         .         .         . 

147 

Railway  and  Canal  Commission: 
Composition,  powers,  etc. 


49-54 


Index 


327 


Railways,  coming  of,  etc. 

Railways,  relation  to  shippers 

Rates,  theories  of    . 

Rate  wars 

Reichseisenbahnamt 

Rhine 

Rhone 

Ripley,  W.  Z. 

Roman  Co.    . 

Roosevelt,  President 

Rotterdam     . 

Ruhr  District 


Pages 

5-9 
11-12 

242-4 
206-7,  248 
169-70 
144-8 

63 
277 

los 

266-7 

161 

144 


Saar  District 

Sax,  E. 

Saxony 

Schwabe,  H.  . 

Seidler  and  Freund 

Seine 

Sherman  Law 

Sicilian  Co.    . 

Smyth  vs.  Ames 

Social  Circle  case 

Southeastern,  etc.,  Railway      . 

Southern  Railway  (Fr.)   .... 

Southern  Railway  (It.)    .... 

Southern  Railway 

Southern  Railway  and  Steamship  Association 
Southern  territory,  rate  making  in      . 
Spaventa        ...... 

Spediteur  (shipping  agent) 

Spera,  G.        .  .  •  •  •  • 

Spokane-Reno-Pacific  decision 

Spree  ...... 

State  Operation  •         •    ^  .  •     _ 

Attitude  of  Great  Britain  and  the  Umted  States 
Austria   .... 

Fiscal  results     . 

Methods  of 

Rates 

State  vs.  private 
Belgium 

Coefficients  of  operation 

Fiscal  results 

Methods  of 

Rates 


144 
13 

137. 151-2 

177 

176 

82 

211 

11-13,115 

265 

264 

20 

72 

105,107.110 

187 

209 

233-6 

108 

129, 162 

133 
272,274 

147 
278-316 
286-7 
292-5 
294-5 
294-5 
294-5 
292-4 
287-92 

291 
290-2 

290 
291-2 


328  Index 


Pages 
State  Operation — Belgium — Cont. 

State  vs.  private          .          .         .         .          ,  287-90 

Extent  of         ......         .  287 

France    ........  297-9 

Fiscal  results     ......  298 

Methods  of        .....          .  298 

Rates        .......  298 

State  net  .......  297-8 

Germany 299-303 

Bavaria    .......  299-301 

Fiscal  results     .         .         .         .         .         .  301-2 

Methods  of        .....         .  302-3 

Prussia     .......  299-302 

Rates        .......  302-3 

Saxony     .......  299-301 

State  nets 299-301 

History  of 286-303 

Italy 295-97 

CoeflBcients  of  operation      ....  296-7 

Fiscal  results 296 

Rates        .......  297 

Methods  of 282-6 

Reasons  for      ......         .  278-82 

Results 303-5 

Steam: 

Application  to  locomotives         ....  5 

To  ships           .......  4-5 

Suez  Canal 216 

Supreme  Court       ......  257, 258,  262-5 

Judicial  review  of  interstate  commerce  commission 

decisions  .......  264-5 

T 

Taft,  President 276 

Tajani,  F.       .......         .  133 

Tanner,  H.  S 277 

Telegraph       ........  4 

Terminal  charges    .......'      52 

Timm  and  Sons  vs.  Northeastern  Railway             .         .  55 

Traffic  Associations          ......  209-1 1 

Transcontinental  territcry,  rate  making  in  .  233, 237-8 

Trans-Missouri  Freight  Association   ....  210-11 

Trunk  Line  Association  ......  309 

Trunk  Line  territory,  rate  making  in           .         .  210,232-3 

Turnpike 15. 45i  179, 181 

U 

Ulrich.lF 60,101,133,176 


Index 


329 


Union  Pacific  Railway     .         .         ..         • 
United  States— Railway  Transportation     . 
Amendnaents  (to  constitution)    . 
Area        ..•••• 
"Blanket"  rates       .  •  .  ,     • 

Capitalisation,  compared  with  European 
Cars,  size  of     . 

Coal,  output  of         .         •         •,'.,,   T7  • 
Coefficients  of  operation,  compared  with  European 
Combination    ..•••- 
"  Commerce  "  clause 
Commerce  court       .         .         .         • 
Commissions,  state  .... 
"Commodity"  rates 
Companies,  number  of       .         . 
Competition  (and  combination) 

At  centres  .         .         .         • 

Extent  of  .... 

Idea  of,  compared  with  European 
Of  markets         .... 
Regulation  by    . 
Results  of  . 

ConsoUdation  (of  lines)      . 
Discrimination  in  rates 
Distance,  in  rate  making  . 
Dividends  (earnings) 

Compared  with  European   . 
Express,  companies,  profits,  rates 
Freight  service  and  rates  . 

Character,  compared  with  European 
Classification     .... 
Density  of  traffic        .         •  .  ,     • 
Haul,  length  of,  compared  with  European 
Interstate  traffic         .... 
Intrastate  traffic         .... 
Items  of    . 
Rates: 

Average  of  .         .         .         - 

Compared  with  European     . 
Decline  in  ... 

Elastic        .  •  •       .  • 

Rate  making,  competition  in 
In  Mississippi  valley,  etc. 
In  Southern  territory   . 
In  transcontinental  territory 
Ton-mileage       .  .  .  • 

Tonnage  .         .         .         •         • 
Compared  with  European    . 


Paces 

200 

178-277 

252 

3" 

274 

188-9 

225,241 

26 

189-90 

203-14 
252 

275-6 

249-52 

227, 229, 230, 241 

187 

203-14 

213-14 

212 

196, 208 

213-14 

203-4 

204 

204-5 

206-7, 248, 253-4,  257 

212-13,239 

190-2 

191-2 

306-9 

224-42 

226 

227-30, 232-3 

226-7 

225 

252 

252 

227 


239-42 

241-2 

240 

244 

230-2 

236-7 

233-6 

237-9 

225 

225 

224-5 


330 


Index 


Pages 

United  States — Railway  Transportation — Cont. 

Interstate  Commerce  Act  .         195,  254-60,  268,  270-1 


Lines,  growth  of 

Manipulation  ...... 

Mileage: 

Growth  of  ...... 

Mileage  per  10,000,  compared  with  European 

Per  100  sq.  miles,  compared  with  European 
Passenger  traffic,  service,  rates 

Classes      ....... 

Journey,  length  of       . 

Mileage     ....... 

Per  capita  trips,  compared  with  European 

Percentage  per  class,  compared  with  European 

Rates,  decline  in 


Pools 

Attitude  of  courts  and  legislatures 
Population,  density  of,  compared  with  Germany 

and  Great  Britain 
Postal  service,  classes,  parcels,  rates,  etc 
Reasonableness  of  rates     . 
Receiverships  .... 

Speculation      ..... 
State  aid  ..... 

State  commissions    .... 
State  control    ..... 

By  charters        .... 

By  constitutional  provisions 

By  general  laws 

Machinery  and  ideas  of 

By  nation  .... 

By  specific  laws  and  commissions 
Supreme  court          .... 
Trading  in  shares      .... 
Traffic,  general  conditions  of 
Waterways       .         .         .           180-1,216 
Zone  system     ..... 
Upper  Italy  Co 


178^2 
195-6 

182-6 

192 

192 

218-23 

219-21 

29,  219-21 

219 

29,219 

222-3 

221-2 

207-10, 254 

209-10 


313-14 
307-16 

•  244, 257 
194 

193-6 

184, 197-202 

260 

•  245-76 

•  245-49 
247 

245-47 

245-76 

252-76 

■       249-52 

257-8,  262-5,  275-6 

194-5 

.       215-18 

18, 233-4,  272-3 

274 

105 


Value  of  service  principle  of  rates 
Vanderbilt  systems 


W 


Wagner,  A.    . 
Weber,  M.  M.  von 


230-1,  242-4, 258, 260-3 
187 


315 
13 


Index 


331 


Pages 

Weichsel 

Weser 

Western  Co.  (Fr.)  . 

Weyl,  W.  E.  . 

Windom  Committee 

Z 

147 

147 

.        72, 298 

60,  101 

253-4 

Zone  system 

.        •        • 

.      128, 238 

By  Arthur  Twining  Hadley 

(President  of  Yale  UniTcnity) 

Economics.     An  Account  of  the  Relafions  be- 
tween  Private  Property  and  Public  Welfare. 
Octavo,  gilt  top        .         .         .         net,  $2  50 
"  No  higher  compliment  can  be  paid  this  work  than  to  say 
that  it  is  hard  to  determine  whether  the  epithet  judicial  or 
judicious  would  more  appropriately  characterize  it.     .     .     . 
As  a  whole,  we  do  not  hesitate  to  affirm  that  the  results 
reached  by   Professor  Hadley  will  commend  themselves  to 
candid  thinkers  as  true.     ...     It  will  not  only  be  found 
invaluable  by  readers  at  large,  but  will  also  at  once  command 
the  attention  and  admiration  of  economists  the  world  over." 
— Nation. 

••  It  is  difficult  to  exaggei-te  the  wealth  of  thought  and  the 
keenness  of  analysis  contained  in  these  chapters.  Each  one  is 
crammed  full  of  matter,  presented  in  an  attractive  manner, 
illustrated  by  references  to  history  and  to  contemporary  bufi- 
ness  methods,  and  often  summed  up  in  some  phrase  or  some 
statement  of  likeness  or  unlikeness  that  is  pregnant  with  sug- 
gestiveness." — Prof.  Richmond  Mayo-Smith,  in  Political 
Science  Quarterly. 

G.  P.  PUTNAM'S  SONS 

New  York  London 


Railways 
in  the  United  States 

Their  History,  their  Relation  to  the  State,  and 

an  Analysis  of  the  Legislation  in 

Regard  to  their  Control 

By  Simon  Sterne  (1839-1901) 

With  Supplementary  Notes  Continuing  the  Record  to  191 1 
Crown  8vo.    $1.55  net.    By  mail,  $l.50 

This  work  is  made  up  of  three  papers  con- 
tributed by  Mr.  Sterne  on  the  subject  of  rail- 
road management  and  of  the  relations  of 
railways  to  the  community.  It  covers  the  sub- 
stance of  certain  reports  prepared  by  him  for 
commissions  which  were  investigating  the  work 
of  the  railways.  It  is  some  years  since  these 
papers  were  first  brought  into  print,  but  the 
matters  considered  in  them  belong  to  a  group 
of  questions  that  are  still  awaiting  solution. 
Excepting  for  the  fact  that  the  problem  is 
larger  to-day  than  it  was  when  it  was  first 
taken  up  for  consideration  by  Mr.  Sterne,  and 
that  its  vital  interest  for  the  community  has 
been  more  clearly  emphasized,  the  conditions 
differ  very  little  from  those  that  were  in  force 
at  the  time  the  conclusions  and  recommenda- 
tions arrived  at  by  Mr.  Sterne  were  first  brought 
before  the  public. 

G.  P.  Putnam's  Sons 

New  York  London 


By  James  Albert  Woodburn 

(Professor  of  American  History  and  Politics,  Indiana  University) 

The  American  Republic  and  Its  Qovernment. 

An  Analysis  of  the  Government  of  the  United 
States,  with  a  Consideration  of  its  Funda- 
mental Principles  and  of  its  Relations  to  the 
States  and  Territories.  Octavo  (by  mail, 
$2  20) net^  $2  00 

"A  sounder  or  more  useful  commentary  has  never  before 
seen  the  light.  Even  Mr.  James  Bryce's  study  of  the  'Ameri- 
can Commonwealth  '  must  on  the  whole  be  deemed  less  fruit- 
ful. Not  a  single  page  should  be  overlooked." — M.  W. 
Hazeltine  in  the  N.  Y.  Sun. 

*'  Every  citizen  that  wishes  to  obtain  a  clear  and  compre- 
hensive knowledge  of  the  government  under  which  he  lives 
can  hardly  forego  acquaintance  with  this  work,  and  its  orderly 
arrangement  and  lucid  style  will  make  the  acquaintance  a 
pleasure  as  well  as  a  profit." — Indianapolis  News. 

Political  Parties  and  Party  Problems  in  the 
United  States.  A  Sketch  of  American 
Party  History  a  vd  of  the  Development  and 
Operations  of  Pa  "ty  Machinery,  together  with 
a  Consideration  o "  Certain  Party  Problems  in 
their  Relations  to  .Political  Morality.  Octavo 
(by  mail,  $2  20)         .         .        ,        net,  $2  00 

"An  exceptionally  clear,  interesting,  and  impartial  history 
of  American  political  parties,  a  lucid  explanation  of  the  work- 
ings of  party  machinery,  and  a  strong  statement  of  the  moral 
evils  now  debasing  our  political  life,  and  the  remedies  which 
an  awakened  public  conscience  may  apply.  A  thoroughly 
good  book  for  the  school  and  for  the  study. '  — Outlook. 

i'mnd  for  Descrlpttoe  Circular 

G.  P.  PUTNAM'S  SONS 

NEW  YORK  LONDOW 


"  The  best  summary  at  present  available  ot  the 
political  history  ot  the  Halted  States." 

Fbank  H.  Hodder,  Professor  of  American  History  in  the 
University  of  Kansas. 


American  Political  History 
1763-1876 

By  Alexander  Johnston 

Edited  and  Supplemented  by 

James  Albert  Woodburn 

Pkofessor  of   History  and   Political   Science,   Indiana    Unl 

versity;  Author  of  '•  The  American  Republic," 

"  Political  Parties  and  Party  Problems 

in  the  United  States,"  etc. 

/m  two  parts  ^  each  complete  in  itself  and  indexed^  Ocatvo, 
Each,  net  $2.00 

X.    The  Revolution,  the  Constitution,  and  the  Growth 
of  Nationality.    1763-1832. 

3,    The  Slavery  Controversy,  Secession,  Civil  War, 
and  Reconstruction.     1820-1876. 

These  volumes  present  the  principal  features  in  the  political  history 
of  the  United  States  from  the  opening  of  the  American  Revolution  to 
the  close  of  the  era  of  the  Reconstruction.  They  give  in  more  con- 
venient form  the  series  of  articles  on  "American  Political  History  "  con- 
tributed to  Lalor's  "Cyclopedia  of  Political  Science,  Political  Economy, 
and  Political  History,"  by  the  late  Professor  Alexander  Johnston. 

"  These  essays,  covering  the  whole  field  of  the  political  history  of  the 
United  States,  nave  a  continuity  and  unity  of  purpose;  irrfroduced, 
urranged  and  supplemented  as  they  have  been  by  Professor  Woodburn 
(who  contributes  a  very  necessary  chapter  on  the  Monroe  Doctrine)  they 

t resent  a  complete  and  well-balanced  history  of  the  politics  of  the  Uoitea 
XaXtA."—Hart/ord  Courant. 


G.  P.  PUTNAM'S  SONS 
New  York  London 


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